23 May 2020

Home Office Deductions

There is no doubt that the working environment is going to change after COVID-19. Open plan offices might well be a thing of the past for many corporates. Working from home can have its benefits such as not spending 4 hours in traffic every day. There are also certain tax deductions available if criteria are met.

The SARS requirements in order to claim

  1. The home office must be exclusively used (Can’t be shared space, such as a nursery or spare room with a bed. Must be specifically designated as office area)
  2. Specifically equipped (Furnished as home office. Computer, Desk, chair, files, etc.)
  3. This should be the space where you mainly perform your business activities (more than 50% of your work)

What costs are deductable?

  1. Annual Home Loan Interest / Rental paid
  2. Rates, electricity, water, gas, security
  3. Cleaning service
  4. Security
  5. Repairs and Maintenance, not improvements

Cost are aportioned based on SQM of the home vs the office.

Negatives

Keep in mind that if you own the property, this deduction may attract a capital gains consequence when you sell. Although not massive there is an impact as you are using your home for the purposes of trade. For those renting this would not impact you as the property is already been used for trade by your landlord.

Example

A homeowner with a 250 Square meter home of which 20 Square meter study is used as a home office will have a home office deduction as follows: 

Rent PaidR132 000
ElectricityR13 650
ADTR2 988
CleaningR42 000
PaintingR45 000
TOTAL EXPENSESR235 635
The home office deduction for this taxpayer would be R18851 with a potential tax saving of R4336 a year for the average South African.

Pro Tip

You need a letter from your employer stating that you are required to work from home. Sole traders do not require letters. If you operate a company, your rental invoice to your company would look similar to the above.