Tax deductions for home office expenses will only be considered in certain circumstances: Picture: Nataliya Vaitkevich/Pexels
Landlords and employees that work from home offices have less than three months to file their tax returns and claim certain expenses back from the South African Revenue Service (SARS).
While ordinary homeownership does not offer any tax benefits, owning an investment property or having a home office will affect one’s tax return.
As a landlord, you are required to declare the total amount of rental income received as part of your taxable income, but Adrian Goslett, regional director and chief executive of RE/MAX of Southern Africa, says you can lower that taxable income by making certain deductions of non-capital expenses.
Read our latest Property360 digital magazine below
He says non-capital expenses are those that you are obliged to incur when letting out a property. Examples include items such as:
By deducting these expenses, landlords can lower how much tax is owed by lowering their taxable income.
“These expenses won’t automatically reflect on your return, so it is important to take the time to submit these when filing your return. Be sure to keep all receipts on file in case SARS ever asks for proof of the expenses.”
Another thing that Goslett says won’t automatically be included on your individual tax return is the deduction for home office expenses, if they apply. A tax deduction can be made based on the interest charged on the outstanding bond amount if you are employed, and a condition of the employment is to carry the cost of keeping a home office as the central business location.
Section 23(b) of the Income Tax Act states that a tax deduction for home office expenses will only be considered in the following circumstances:
Typically, SARS explains, the types of home office expenditures referred to in section 23(b) are those that are closely linked to the premises, namely:
Other typical expenditures that may qualify for a separate deduction in respect of maintaining a home office, includes:
The two lists above do not reflect expenditure that is necessarily deductible but merely the types of expenditure that may typically be incurred in relation to maintaining a home office.
It can be complicated to perform the necessary calculations for this deduction, especially if the homeowner withdraws an amount from the bond or makes a substantial additional payment towards the bond. Goslett therefore recommends that homeowners consult with a professional tax consultant to help them work out this amount correctly.
“It is important to work out any tax deductibles correctly, as there could be serious penalties if the return is submitted incorrectly. If there is ever any area of doubt, it is best to consult with a professional financial adviser or tax consultant who can provide assistance and guidance through the process.”
Read here for more information on claiming tax refunds for a home office.
IOL Business