On tax deduction for the apartment

This time, let's not talk about business. Ekaterina Mamontova talks about how to get money back for buying an apartment.

The state will refund you for buying an apartment 13% of:

• 2,000,000 rubles from the cost of the apartment and
• 3,000,000 rubles from the amount of paid interest on the mortgage loan.

It is called a property-related tax deduction and is not tied to the date of purchase of the property. The state will return the money for such a deduction from the personal income tax you paid.

You may ask for the property-related tax deduction if:

• The apartment is located in Russia.
• You have a residence permit in Russia.
• You are a payer of personal income tax.

How to calculate the amount that is subject to refund? You should multiply the amount of the cost of the apartment (but not more than 2,000,000 rubles) and the amount of interest paid (but not more than 3,000,000 rubles) by 0.13.

If the resulting figure is more than the personal income tax you paid, you will get just the amount of tax paid.

With shared ownership, owners can:

• receive a tax deduction in proportion to their share;
• agree in writing to request a full deduction for one of the owners.

If the share belongs to an underage, then one of the parents may receive a tax deduction for him/her. At the same time, the child will not lose his or her right to receive a property-related tax deduction when buying his or her own home in the future.

Please note that sole entrepreneurs that apply the simplified taxation system cannot receive a deduction. If the taxation applied is general, then they will receive a deduction on a general basis.

Let's dig into how to get a deduction for a couple. Firstly, it is possible: it often happens that it is even more profitable to receive it together, but with the tax deduction for interest on mortgages, the situation is the opposite. Let's take a closer look at the specifics of these deductions.

Property-related tax deduction

A joint deduction is beneficial when buying real estate worth over 2 million. Why? It's all about the limits. Each of the spouses has a limit of 13% of the property value, but not more than 2,000,000 rubles. Therefore, in order to get a full deduction for an apartment worth, for example, 3,000,000 rubles, it is advantageous to add up marital limits.

Let's have a look at an example:

• A. If an apartment costs 2,000,000 rubles, the limit allows you to return 260,000 rubles alone or together (each will receive 130,000 rubles). Thus, you have used the entire allowed limit.
• B. If an apartment costs 3,000,000 rubles, you can return 390,000 rubles, but this amount exceeds the allowable deduction limit, which we talked about above. You can fully return the entire available deduction amount only together, since the total limit of spouses is 520,000 rubles (260,000 rubles x 2).

Thus, if the spouses do not share the property deduction when buying an apartment, the cost of which is more than 2,000,000 rubles, then they lose the opportunity to return part of the possible deduction, in our case it is 130,000 rubles. The maximum refund limit is 260,000 rubles for each, which makes it 520,000 rubles for two – that’s the amount you can return if the value of the property is 4,000,000 rubles. With an increase in property prices over 4,000,000 rubles the size of the limit is still 520,000 rubles for two.

Mortgage interest deduction

Now let's move on to the joint mortgage interest deduction. This is also possible, but here’s a nuance: the tax deduction for mortgage interest can be used only for one object - it cannot be transferred to other objects.

Let’s suppose that for the purchase of property by the family 1,000,000 rubles were paid as interest. From this amount, you can return 13% or 130,000 rubles, while the limit on interest is 390,000 rubles (that is the maximum amount with which a return of 13% is possible is 3,000,000 rubles). This means that if you refunded the deduction for one object, but not in the full amount of the limit, then you will no longer be able to use the remaining part of the limit.

If you plan to take another mortgage, then it is better to request for a deduction only by one of the spouses in order to keep the limit, since if the deduction is divided into two, you will not be able to take advantage of the next deduction.

Let’s sum up:

The limit on the tax deduction per person is 260,000 rubles (from a position worth 2,000,000 rubles). After exceeding 2,000,000 rubles, it is beneficial to make a joint deduction, the maximum possible deduction for two is 520,000 rubles (from a position worth 4,000,000 rubles). You can use the tax deduction for an apartment until the limit is reached.

The limit on the tax deduction for interest on a mortgage is 390,000 rubles (with the paid amount of interest equal to 3,000,000 rubles). Make a joint deduction if you don't plan on taking out another mortgage. Mortgage interest tax deduction can only be used for one object.

Author: Ekaterina Mamontova, assistant accountant.