Since the start of national lockdown on 26 March 2020, salaried employees have been working from home, some without support from their employers, despite being without a choice and for many, without added remuneration.
To combat the spread of Covid-19 and its consequences, many employees have had to establish a ‘home office’ using their own finances and resources. Does the Income Tax Act allow for any relief for this?
Typical expenses that an employee would incur include:
In addition, regular expenses to consider are:
To be eligible to claim home office expenses against remuneration, Section 11 of the Income Tax Act states that only a person carrying on a “trade” shall be allowed to claim the following deductions from the income derived from such trade:
Whereas employment is included in the definition of “trade” in the Act, all the expenses mentioned above would be deductible thereby reducing the employee’s taxable income which would, no doubt, result in a refund from SARS. That would indeed be the case if it was not for the limiting or exclusionary provisions found in Section 23 of the Act and more specifically Sub Sections (b) and (m).
The first exclusion is that no deduction shall be allowed for domestic, private and/or non-trade related expenses. However, if a part of a home is specifically equipped for and occupied and exclusively used for purposes of a trade (employment) and is used regularly, such expenses relating to that part of the home will be deductible as long as the employment is performed mainly from that home office.
What the first restriction means is that the part of the home or home office used by the employee must only be used by that employee and nobody else and it can only be used for purposes of employment and nothing else. In addition, more than half of the work performed by the employee must be from his/her home office or part of the home dedicated as a home office. If any one of these is not complied with, none of the home office expenses will qualify for a deduction.
The second limitation or restriction, and possibly the most significant for the employee, is that no home office deduction will be allowed other than:
The harsh reality is that the only set-up costs that can be claimed are the improvements directly related to the actual portion of the building occupied and used solely as a home office and for nothing else.
To claim for home office expenses you will need a letter from your employer confirming that you worked from home, a drawing of the property with measurements as well as clearly showing the home office as well as expenses spreadsheet that can be found under our download page.