Can you claim a home office tax deduction?

Daniel Baines | 08 September 2022

Daniel Baines works as a tax manager at Vialto Partners and is the author of How to Get a SARS Refund and How to get a SARS Refund for Retirees. He has been working as a tax professional in South Africa for the the last seven years and has a PhD in tax from the University of Pretoria.

With recent changes in the working environment, a lot of people are working from home permanently or spending some time at the office and some at home. This may introduce an opportunity for you to reduce your tax liability by claiming a deduction for home office expenses.

If you work for an employer, however, you can only claim this deduction under very specific circumstances. These are as follows:

You are required to work from home for at least 50% of the time. The South African Revenue Services (SARS) will require a letter from your employer stating that you are required to work from home.

You have a room in your house (doesn’t matter whether you are renting or own the property), where you work from which is solely used as a home office and is equipped as such.

Note that SARS is very strict on this requirement and the room cannot also be used as a kids’ playroom or yoga room. If you are subject to an audit, SARS can request photos of the room as well as a floor plan of the property. SARS is also entitled to conduct a site visit at your home.

If you meet these requirements, you can claim a home office deduction on your annual tax return and reduce your tax liability for the tax year. The expenses you can claim include rent and the interest on your bond (not the capital repayments), water and electricity.

How it works

You will have to establish what percentage of your house is used as an office (this is a percentage of the actual house not including the garden or any outside areas).

For example, if your home office is 10% of your property, you will then be able to claim 10% of the rent, electricity and water for the tax year as a deduction on your annual tax return. Assume your home office is 10% of your property and your home office deduction amounts to R12 000 for the year (based on annual rent of R100 000 and electricity and water of R20 000). This deduction can reduce your tax liability by up to R5 400 (if you are in the 45% marginal tax bracket).

The lower the tax bracket you are in, the lower your deduction will be. For example, using the same figures as above, if you are in the 36% tax bracket, a home office deduction claim of R12 000 will reduce your tax liability by 36% of R12 000 or R4 320. Read more: How do the income tax brackets work and what is my marginal tax rate?

Employees cannot claim Wi-Fi and data expenses. Freelancers and business owners can claim these expenses split appropriately for private and business purposes and not in relation to the size of the home office.

The CGT sting

It is very important to note that if you own the property and claim this deduction, it will reduce the primary residence exclusion against capital gains tax (CGT) that you are entitled to when disposing of the property. When you dispose of the home which you live in, you are entitled to exclude the first R2 million of the capital gains before you calculate the CGT (subject to some provisos which may reduce this exclusion).  

However, if part of your home has been used as a home office and you have been claiming tax deductions for related expenses, this part of your home will be excluded from this exemption.   

Audit risk

You must be sure that you meet all the necessary requirements before you attempt to claim a home office deduction. Over the past tax filing season, 80% of taxpayers who submitted home office claims were selected for an audit and after the audit, SARS only allowed 40% of these deductions.