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Do you know when CGT applies to your home office?

by , 26 April 2013
Kenyans are in uproar as capital gains tax or CGT is about to be reintroduced in the country. Luckily, selling your one and only home won't be subject to CGT in the country as more people across the globe are working from home. Here in South Africa, if you work from home you're entitled to claim home office deductions from SARS - but did you know that CGT also applies if you then sell the home you work from?

Kenyan investors and property owners have been lucky as the country abolished capital gains tax in 1985 to encourage investments in real estate and securities, explains FSP Business.
Now, the Kenya Revenue Authority wants to reintroduce the CGT, almost three decades after it was abolished. 
The reason? 
Tax revenue is not enough to meet the costs of government in Kenya.
And as capital gains are a form of income, authorities are now stating CGT needs to return to cushion the Kenyan government's coffers. 
Lucky for the Kenyans though, first homes won't be subject to CGT, so selling the one house you own won't result in any CGT, says AllAfrica.
Here's when CGT's triggered in South Africa…
That's definitely not the case in South Africa, where CGT is triggered any time you dispose of a capital asset like property – whether it's through selling, donating, scrapping, or distributing your company's assets, says FSP Business.
That's why CGT confusion comes in when a business is run from a home.
You'll already know that you can make home office deductions if a part of your house is used regularly and exclusively for the purposes of the trade, adds FSP Business
But did you know that if you use a portion of your residence for business purposes, SARS doesn't see this portion as part of a primary residence?
CGT applies to your home office – if it meets certain criteria
This means any gains or losses made on this portion (your home office) must also be included for CGT purposes. 
This means that if you claim expenses for your office or study at home, that portion of your property will be subject to CGT when you dispose of the property, explains The Practical Tax Loose Leaf.
That's why simply setting a desk up in the corner of your dining room, and calling it your home office during the day, won't cut it, warns The Practical Vat Loose Leaf.
Do your research before setting up a home office to make sure you clearly understand what will be taxed and how – you could save yourself some money in the long run by doing so.

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