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Confused about home office deductions? Here's how they work

by , 02 May 2014
On 15 March 2011, SARS published an update to Interpretation Note 28 which deals with the, deduction of home office expenses. While the update was published over two years ago, a lot of companies are still confused with the issue. If you have employees who work from home, continue reading to find out how home office deductions work. It's the only way you can help your employees avoid penalties.


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Have employees who work from home? Use this practical example to help them with their home office deductions

The Practical Tax Loose Leaf Service gives you a practical example of home office deductions or 'work from home tax deductions':

Sarah is an employee for an IT solutions company. She earns a yearly salary of R50 000 and an annual commission of R20 000. She also receives a travel allowance of R3 000, which allows her to make sales visits.

Since Sarah's employer doesn't give her an office to work out of, she's set up a small home office that she uses every day. Of the total 200m² of her home, the office constitutes 20m².This means the office is about 10% of the total area of the house.

Sarah pays interest of R25 000 per year on her bond and she pays rates and taxes of R2 500 per year.

When she set up her home office, she bought a PC for R12 000, a desk for R2 000 and a chair for R800. Her commission-work office expenses (for her cellphone and stationary, etc) amounts to R9 000. And Sarah contributes R5 000 each year to a pension fund.

Note: Sarah will use this info when she calculates her home office deductions. But the big question is how will Sarah be taxed?


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Here's what you need to know home office deductions

Since more than 50% of Sarah's income is a fixed salary, she can't claim expenses relating to her cellphone and stationary.

She can only claim the following expenses (tax deductible expenses)

  • Her pension fund contributions;
  • Wear and tear allowance, for the computer, desk and chair in his office;
  • Travel deduction;
  • 10% of the interest on the bond (since her office is 10% of the area of the house); and
  • Rates and taxes of R250 (this is calculated based on the office being 10% of the area of the house).

Now that you know how home office deductions work, help your employees to work out their tax deductible expenses correctly so they can avoid penalties.

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