If you’ve recently started your own business at home or moved your current business to your home office, you might not be aware that there are opportunities to use the space as a tax benefit. While certain requirements must be met in order to benefit, it is possible to get some of that hard-earned money back during tax season. So, if you’d like to find out about the tax benefits of home ownership, here are the basics, written in collaboration with Private Property.
If you work from home, there are certain requirements to be met in order to qualify for the tax benefit. The first requirement calls for a section of your home to be equipped and designated specifically for the purposes of your business activity. The second requirement calls for the designated area to be used sufficiently in order to justify its use as an office. The third requirement calls for activity in the office area to be exclusively business related and not personal. Whether the home is yours or is rented, the same requirements apply.
Once it has been established that your home office fits this description, which business related expenses can you claim back on? Expenses are split into direct and indirect expenses. Direct expenses which relate specifically to the operation of your business can be claimed back in full such as:
- the repair and maintenance of the office
- internet and telephonic expenses
- office furniture
- stationery
- equipment
- employee wages
Indirect expenses relate to the expenses incurred as a result of your business practices, such as:
- rent or bond payments
- electricity
- water, cleaning
- security
- related insurance
Only a portion of indirect expenses can be claimed back. While a cleaning service or person within the home does not count as a deductible expense, you can deduct the wages you pay for your home office specifically to be cleaned.
When you claim back for a partial or full deduction of these expenses, they must be specific to the portion of your home used as the office. Ensure that you retain all invoices or bills proving the payment of these expenses and calculate how much of each bill was spent within the office. This can be calculated by dividing the floor area of your home office by the total floor area of the home. If, for example, you are about to buy a home and expect to use a room or portion of a room as a home office, you can use a bond calculator to determine your monthly payments and inevitably how much you could get back in tax.
So if you plan on claiming tax back on your home office expenses, remember to check if you fit all the requirements, determine what all your direct and indirect expenses are, and keep a record of all payments you make that can be claimed for during tax season. As SARS can check up on any information that you provide, it is vital for everything you offer to be as accurate as possible.
