As we see a shift of more businesses choosing a work from home environment, we see more employees question whether or not they are able to claim tax deductions for working remotely.
The short answer is that they would be able to, depending on a variety of different factors. Employees qualify for certain tax deductions if it is related to their trade. This means that these deductions can only be made on items used completely, or almost exclusively, for work purposes.
Should an individual earn their income from an employer they will not be allowed any tax deductions. However, if you as employee mainly performs their duties in their home office for more than half of their workday, they can qualify for tax deductions.
When setting up your home office it is important to make certain considerations for possible future tax deductions. As a starting point, having a dedicated room in your home that is used for work purposes only, places you on better ground to qualify for these tax deductions.
This is important for full time employees who spend a minimum of half of their working hours in their home office, commission-based employees who do not have an office with their employer, and self-employed individuals who work from home.
Once set up, this office space should be measured for its square meterage and then calculated as what its percentage area is in relation to your whole home is. This is the percentage to work with in work from home tax calculations.
Generally, employees who are working from home for more than half of their workday are allowed to deduct from taxable income this percentage of the total cost of anything related to the property – whether it be rent, bond payments, rates and taxes etc.
Commission based employees are allowed to deduct this percentage off all business expenses, such as phone charges, stationary, repairs and other related costs.
Sole proprietors and freelancers who work from home are able to deduct all business expenses they have without a capped percentage.
If you have a home-based business that is VAT registered you are also able to claim VAT input credits on the cost of maintaining your property. This should be done carefully when claiming for additions or alterations, as SARS will expect you to include VAT in your properties’ total price should you ever choose to sell it.
MMS Group takes a personalised approach on tax consultancy for all individuals or business entities that seek out our assistance. Should you require quality advisory on your tax deductions, feel free to get in touch.
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