home office tax deductions

Can you claim tax deductions for working from home during the pandemic?

Freelancers and other commission earners have long been able to claim for working from home with regard to expenses incurred that would typically have been carried by an employer. The nature of the expenses and the extent to which these may be claimed are set out in section 11 of the Income Tax Act, No 58 of 1962, read in conjunction with sections 23(b) and 23(m). The regulatory framework around the COVID-19 pandemic as governed by the Disaster Management Act, No 57 of 2002, has also meant that many salaried, in-office employees have had to set up home offices for part of the tax year, and can claim home office tax deductions if they meet the criteria necessary to do so.

Who can claim work from home tax deductions 2021?

In order to be able to claim home working tax relief, an employee’s income must consist mainly of commission or other freelance payments. Alternatively, the employee must work mainly from their home office.

If commission or freelance income is the main source of income, the criteria of ‘income’ for the purposes of work from home tax deductions 2021 is satisfied quite easily. It is more tricky if someone is earning a set salary as their primary source of income. In this instance, 50% of the employee’s work for their employer must have been completed from home. This means that in any given tax year, in order to deduct home office expenses, you must have worked from home for six months or more.

In the case of a freelancer or commission earner, it goes without saying that the employee has been working from home. However, in the case of a salaried employee, there must have been an express understanding that the employee was allowed to proceed on a work-from-home basis. With regards to this, you’ll need a letter from your employer confirming that you have indeed worked from home, and for what length of time.

In all cases, in order to claim for working from home, employees must have actual expenses related to their work or related to executing their tasks.

This brings us to the final criteria which we will examine next: the employee claiming office in home expenses, must have a dedicated workspace or ‘home office’. This space must be regularly used by the employee for the purpose of doing his/her work, and suitably equipped for work.

What counts as a work office?

Provided the above criteria are met, the study or home office need not be a separate room, but must involve a separate area utilised mainly for this purpose. Therefore, if someone regularly meets clients in their dining room at home which is also equally used for eating, relaxing and socialising, this would not suffice as a ‘home office’.

What tax deductions can you claim – main things

Here are examples of tax deductions that may be claimed by an employee who is eligible to claim home office tax deductions:

  • Direct work-related expenses such as data and internet connection fees, mobile phone expenses, printer and stationery expenses
  • Pro rata rent on interest on a bond
  • Work premises repairs
  • Pro rata rates and taxes as well as water and electricity

Work from home tax deductions 2021 – a final word

Working from home is not a free pass to submitting claims for tax deductions. The requirements are quite strict. You will need to substantiate deductions filed for with documented proof such as invoices. It may be wise to enlist a professional to prepare your tax returns if you are claiming for home office deductions.

In the budget speech delivered in February 2021, National Treasury announced that due to the momentum the work-from-home movement has gained in general, it would be reviewing which home office expenses would be allowed as tax deductible as well as the process of filing for these deductions, with the aim of having a more expedient system in place in future.

Please keep in mind that this post is for educational purposes only and that further tax advice is required before actioning. Contact our friendly team at Fenns Incorporated for a qualified and experienced Tax Specialist to assist you.