Tax year-end: How to claim for home office expenses

Spoiler alert! SARS does not make it easy to claim home office expenses, so think carefully before filing your income tax return.

Before the COVID-19 pandemic threw life as we knew it into complete disarray, employers were slowly (and often reluctantly) allowing their digitally connected employees to work from home occasionally. Thanks to lockdowns the world over, working from home is no longer a job perk or an exception to the rule.

And yet, when it comes to claiming home office expenses, SARS is still stuck in 2019. Or, should I say, 2011, as that is the most recent iteration of the SARS Home Office Guide. An updated version is in the works, but currently only in draft form, so for now, the 2011 guide needs to inform our approach.

Side note: In the annual Budget Speech delivered earlier this month, Finance Minister Enoch Godongwana said Treasury would review regulations on home office and travel allowances. It appears particularly unfair that you must have a dedicated work area in your home to claim a portion of your rent and utilities as a work-from-home tax deduction.

Unfortunately – and contrary to popular opinion – it’s not that easy to claim home office expenses. Simply working from home at the kitchen counter or dining room table does not mean you can claim WiFi costs. In fact, SARS has explicitly expressed that the legislation regarding what constitutes a home office has not changed in light of the new world of work.

Simply put, a home office must:

1. Be a separate room in the house or on the property.
2. Be used exclusively for the trade which produces income.
3. Be used regularly.
4. Be kitted out appropriately to enable the trade which produces income.

In my view, this is highly discriminatory. Many people pushed to work from home due to the impact of COVID-19 are not fortunate enough to devote a whole room to their laptops.

Nonetheless, let us look at what “regular and exclusive use” means in real terms.

All work and no play

So, you kicked out your flatmate and converted your second bedroom into your home office. Great, the first box is ticked.

However, if you use that room for any other purpose, such as your morning yoga routine or weekend video gaming, then it’s not exclusively used as a home office and can’t be claimed as such. I can hear people asking: “Well, how will SARS know?” You must prove exclusive and regular home office use to SARS – and that is where things become complicated.

Here are just some of the requirements from SARS:

1. A letter from your employer stating that you work from home more than 50% of the time.
2. Photographs of your home office.
3. Logbooks for workers earning commissions (that’s a whole other can of worms!).
4. Property plan/ blueprint to assess square meterage and work out the apportionment.
5. List of equipment used in the performance of work.

Another critical point to make is that if you and your spouse both work from home, you each need a separate office to cater to your specific trades. As soon as you share any portion of a home office, then you can kiss that expense claim goodbye.

Weighing the pros and cons

It’s fair to assume that claiming home office expenses is irrelevant for many people who legitimately work from home. SARS is stringent on assessing home office expense claims and does not approve deductions easily. In fact, according to SARS, “there is a high likelihood that a taxpayer who claims home office expenses for the first time will be selected for verification or audit”.

For most people working from home, I strongly encourage you to weigh up your savings on travel costs versus the potential benefits of a home office expenses claim. If you want to file home office expenses on your income tax return, make sure you get an expert assessment first to ensure that you qualify. A bit of professional assistance to guide this tricky process will go a long way.