The South African Revenue Service recently published an update on claiming home office expenses, warning taxpayers against applying the tax deduction without considering the full implications.
Its advice on the issue comes after a full tax year where many employees were required to work from home.
- There are long-term implications of defining an area in your primary residence as a home office for tax purposes
- SARS flagged many tax returns that included home office claims for verification and warned warned that there was a high likelihood that a taxpayer who claimed home office expenses for the first time would be selected for verification or audit
- SARS warned that defining part of a primary residence as a home office will most likely negatively impact capital gains tax calculations in the future
- Primary residences enjoy a R2 million exemption from capital gains tax, known as the primary residence exclusion. However, the home office area is excluded from the R2 million exemption on a pro-rated basis
- Claiming home office expenses is not trivial, though, and does require diligence on the taxpayer’s part: first, you must accurately measure your work area, then calculate the ratio of your work area compared to the total area of your home. You can then deduct several expenses from your tax according to that ratio
- Taxpayers must compile accurate schedules and provide all slips and vouchers if audited