Tax deductions
Learn what tax deductions are in South Africa and which expenses SARS lets you claim to lower your tax.
Published Wednesday 12 August 2026
Table of contents
Key takeaways
- A tax deduction is an expense you subtract from your gross income to lower your taxable income and reduce the tax you owe.
- SARS allows you to deduct expenses that are incurred in producing income, are not capital in nature, and relate to carrying on a trade, as set out in the Income Tax Act.
- Individuals can claim deductions for retirement fund contributions (up to 27.5% of remuneration or taxable income, capped each year) and donations to SARS-approved public benefit organisations (up to 10% of taxable income with a section 18A certificate).
- You must keep receipts and supporting documents for at least five years in case SARS asks you to prove your claims.
What is a tax deduction?
A tax deduction is a business or allowable expense that reduces the amount of tax you pay. It is subtracted from your gross income to arrive at your taxable income, which is the figure SARS uses to work out what you owe. Tax deductions are sometimes called tax write-offs.
SARS decides which expenses qualify as deductions. If a cost of running your business meets the requirements set out in the Income Tax Act, you can claim it to lower your tax bill.
How tax deductions work in South Africa
The general deduction formula in section 11(a) of the Income Tax Act sets out when you can claim an expense. According to the SARS Tax Guide for Small Businesses, an expense is deductible when it meets all of these conditions:
- It was actually incurred during the tax year
- It was incurred in the production of income
- It is not of a capital nature
- It relates to carrying on a trade
If an expense fails any of these tests, you cannot deduct it. For example, buying a delivery vehicle is a capital cost and cannot be deducted outright, but you can claim wear and tear on the vehicle over time. SARS then applies its published tax rates to your taxable income to calculate what you owe.
Example of a tax deduction calculation
A simple example shows how deductions reduce your tax bill. Jo owns a photographic studio. Last year she earned R770,000 in revenue and had R150,000 in deductible business expenses, such as rent, equipment, insurance and marketing. Her taxable income is R770,000 minus R150,000, which is R620,000. She pays tax on R620,000, not on the full R770,000.
For an expense to qualify, it must have a genuine business purpose. A camera is a legitimate deduction for a photographer, but the same camera would not be deductible for a baker, because it has no connection to that trade.
Common tax-deductible business expenses
Many everyday costs of running a business are deductible when they meet the requirements in section 11(a). This includes many of your start-up costs, along with ongoing costs such as:
- Office or premises rent
- Equipment and tools used in the business
- Business insurance premiums
- Business travel and vehicle costs, backed by a logbook that proves business use
- Home office expenses, apportioned by floor area if you work from home
- Wear and tear (depreciation) on business assets
- Bank charges and interest on business loans
- Marketing and advertising costs
- Stationery and office supplies
Tax deductions for individuals
Individuals who are not running a business can still claim certain deductions. Retirement contributions and donations to approved public benefit organisations are two of the largest deductions available to individuals in South Africa.
Contributions to a pension fund, provident fund or retirement annuity are deductible up to 27.5% of the greater of your remuneration or taxable income. This is subject to an annual cap, which is R430,000 for the 2027 tax year (1 March 2026 to 28 February 2027).
Donations to a SARS-approved public benefit organisation (PBO) are deductible up to 10% of your taxable income. You need a section 18A certificate from the organisation as proof of the donation.
The medical scheme fees tax credit works differently. It is a rebate, not a deduction, so it reduces the tax you owe rather than lowering your taxable income. SARS sets a fixed monthly amount for the main member and each dependant, and it is applied after your tax has been calculated.
What is not tax deductible
Some expenses can never be deducted, whatever your circumstances. These include:
- Personal or domestic expenses, such as groceries, everyday clothing and personal entertainment
- Fines and penalties
- Capital costs, meaning the purchase price of an asset, though you may claim wear and tear instead
If an expense is partly personal and partly for business, you can generally claim the business portion. For example, if you use your cellphone for business 80% of the time, you may deduct 80% of the cost.
Keeping records for SARS
SARS can ask you to prove any deduction you claim, so keep receipts, invoices and supporting documents for every expense. You must retain these records for at least five years from the date you submit your return.
A separate business bank account makes record-keeping simpler. When your business and personal transactions sit in different accounts, it is easier to identify deductible expenses and provide proof if SARS requests it.
How to claim tax deductions
Claiming deductions comes down to good records and accurate reporting. Follow these steps to claim your deductions correctly:
- Keep records of all income and expenses through the year
- Check your IRP5 and other tax certificates for accuracy
- Log in to SARS eFiling and complete your ITR12 return
- Enter your deductions with supporting documents, such as a logbook, section 18A certificate or retirement annuity certificate
- Submit your return before the deadline
If you are a provisional taxpayer, you declare estimated income and deductions twice a year and settle any difference on your final return. Regular financial reports make those estimates far more accurate.
Track your deductible expenses with Xero
Xero helps you record and categorise expenses through the year, so deductible costs are easy to find when tax time arrives. Connect your bank account to pull in transactions automatically, then tag each expense to the right category and keep your records organised and ready to file. Get one month free and see how Xero can simplify your bookkeeping.
FAQs on tax deductions
Here are answers to common questions about tax deductions in South Africa.
What is the difference between a tax deduction and a tax rebate?
A tax deduction reduces your taxable income before tax is calculated, while a tax rebate or credit reduces the actual tax you owe afterwards. Deductions lower the amount you are taxed on; rebates lower the final bill directly.
Can I claim home office expenses in South Africa?
Yes, if you regularly work from a dedicated space in your home, you can deduct a portion of costs like rent and electricity based on your office floor area compared to your whole home. SARS requires the space to be used mainly for work.
Is medical aid a tax deduction?
Medical scheme contributions are not a deduction. They qualify for a medical scheme fees tax credit, which is a rebate that reduces the tax you owe rather than your taxable income.
How long must I keep records for SARS?
Keep your records for at least five years from the date you submit your tax return. SARS can request supporting documents at any point during that period.
Can sole proprietors and freelancers claim tax deductions?
Yes. Sole proprietors and freelancers are taxed as individuals but can deduct business expenses that meet the section 11(a) requirements. Keep detailed records to support every claim.
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.