When will I be able to claim home office expenses?
If you are an employee who works from home and has set aside a room to be occupied for the purpose of “trade”, e.g. employment, you may be allowed to deduct certain home office expenses for tax purposes calculated on a pro-rata basis. Provided that you meet the requirements as set out in the Income Tax Act, section 11(a) read in conjunction with sections 23(b) and 23(m). See below for more information on section 23 (b).
What are the requirements for claiming home office expenses?
Section 23(b) of the Income Tax Act states that a tax deduction for home office expenses is only allowed:
- If the room is regularly and exclusively used for the purposes of the taxpayer’s trade e.g. employment and is specifically equipped for that purpose. The home office must be set up solely for the purpose of working.
- If the employee’s remuneration is only salary, the duties are mainly performed in this part of the home. It therefore means you perform more than 50% of your duties in your home office.
- Where more than 50% of your remuneration consist of commission or variable payments based on your work performance and more than 50% of those duties are performed outside of an office provided by your employer.
What constitutes home office expenditure?
Typically, the type of home office expenditure referred to in section 23(b), namely:
- rent of the premises;
- cost of repairs to the premises; and
- Expenses in connection with the premises.
In addition to these expenses, other typical home office expenditure may include –
- Rates and taxes;
- Office equipment; and
How do I calculate home office expenses?
The tax deduction is calculated for the area of the home utilised for trade e.g. employment purposes. Home office expenses are calculated on a pro-rated basis (square meters of area of home office versus total square meters of your home).
What is the method of calculating home office expenses?
Should you qualify for a deduction in respect of home office expenses, the amount must be calculated on the following basis: A / B x total costs, where:
- A = the area in m² of the area specifically equipped and used regularly and exclusively for trade e.g. employment
- B = the total area in m² of the residence (including any outbuildings and the area used for trade in the residence)
- Total costs = the costs incurred in the acquisition and upkeep of the property (excluding expenses of a capital nature).*
*Note that only expenses relating to the premises must be apportioned based on floor area (such as for example rent, interest on bond, rates and taxes, cleaning, etc.) Expenses that do not relate to the premises (such as wear and tear on equipment and furniture) do not need to be apportioned based on floor area.
Where will I claim home office expenses on my Income Tax Return (ITR12)?
Should you qualify for a deduction in respect of a home office; enter the amount calculated next to the source code 4028 (Home Office Expenses) in the “Other Deduction” container on your Income Tax Return.