If working from home has become the norm for you, you may qualify for a deduction of home office expenses against your income. The onus is on you, the taxpayer, to prove or convince SARS that the expenses are, in fact, deductible.
To qualify for a home office expense deduction, the taxpayer should prove that the home office:
- Is specifically equipped for this purpose. It must be equipped with the tools and equipment required to render the trade (desks, chairs, computers, printers, trade-specific equipment, etc.). (Unfortunately, a lounge, living room or empty unoccupied room will not qualify as a home office.)
- The home office must be used regularly and exclusively for the purposes of your trade. (The odd email over a weekend is not sufficient, and the space may not be used for any alternative purpose.)
- More than 50% of the taxpayer’s duties must be performed in your home office. The Income Tax Act does not prescribe whether this refers to time or volume of work, but it is generally accepted as the total working time.
Allowable home office expenses are, generally, the following:
- Rent;
- Cost of repairs as relates to the home office;
- Rates and taxes;
- Electricity; and
- Cleaning costs and wear and tear.
Since the above costs relate to the entire premises and only a portion of the premises that the taxpayer occupies is used to perform the work duties, an apportionment must be made based on the floor size in m² of the home office and the total area in m² of the residence, including any outbuildings and the home office. Expenditure that is not incurred on the entire premises, such as wear and tear on office equipment, need not be apportioned.
Although not specifically prescribed, SARS generally request taxpayers to provide the following in discharging their burden of proof when claiming a deduction for home office expenses:
- There must be a direct relationship between expenses incurred and the production of income.
- The taxpayer must provide SARS with an employment contract or letter from their employer confirming the use of a home office. (It must stipulate why the taxpayer is required to perform work from home and whether an office is provided at the employer’s premises.)
- If the employer offers a workplace office that is at the taxpayer’s disposal, full details regarding any restrictions concerning the use of this office must be stipulated in the letter from the employer.
- If the taxpayer is expected to work at home after hours, full details on the frequency of use thereof are also required from their employer.
- A schedule of the home office expenses must be submitted to SARS. SARS may request the submission of all the relevant receipts.
- Photographs of the dedicated and specifically equipped area should also be submitted.
- A copy of at least one utility bill that indicates the home’s physical address if a physical inspection is deemed necessary by SARS.
- Note that the amounts claimed as home office expenses must be declared next to the code 4028 on the taxpayer’s ITR12 return.
As a general rule, it is important to stress test the deductibility of all expenditures incurred with your tax practitioner to ensure that all expenses have been appropriately claimed. Lastly, if you sell your primary residence and previously claimed a deduction for home office expenses, it will influence the primary residence exclusion available to taxpayers.