As tax season begins, we must ensure we claim all taxable expenses for our small and micro businesses. There is much confusion surrounding the Home Office deduction.
What can freelancers and subcontractors claim for home office expenses? While it’s true that tax authorities are tightening guidelines on claimable expenses for employees working from home, the same restrictions do not apply to freelancers and subcontractors regarding allowable deductions.
Let’s start with the basic test to determine if you qualify as a freelancer or subcontractor with SARs.
- Do you earn more than 80% of your income from one source?
- Did you receive any of your work equipment from a client?
If you answered yes to the above two questions, then SARs would classify you as an employee rather than a freelancer or contractor.
As your employer is responsible for reimbursing you for home office expenses, you cannot claim any home office expenses against your income.
If you answered “NO” for the first question and “YES” for the second, SARs can choose to see you as either option. You can submit your claim, but SARs may deny some or all of your home office expense claims. They assess these claims individually.
However, if you answered no to both questions, you are allowed to claim the following against your income:
- a portion of your internet costs,
- a portion of your electricity expenses,
- a portion of your refreshment costs.
An easy way to understand the cost of refreshments is to remember your time in an office; the basic offerings for staff typically include tea, coffee, sugar, milk, and water.
Always keep office supplies separate from general groceries. SARs will not allow the claim if it’s all grouped. Limit the total to R450 each month.
You can include some of your cleaning products; however, you cannot claim the cost of your domestic worker or gardener unless you have registered them as employees of your business and run a payroll.
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