Borrow money with a tax benefit?
Tax Benefit for Homeowners Borrowing Money
Home owners who want to borrow money can deduct the interest on a loan for tax purposes. This is possible under certain conditions. We are happy to explain here how a loan can yield tax benefits.
A loan with a tax benefit, how does that work?
Homeowners can deduct the loan for tax purposes under conditions in both box 1 and box 3.
Box 1: If you borrow money to renovate your home, the interest on that loan is, subject to certain conditions, tax-deductible in box 1. It concerns renovations and renovations that benefit the value of your home. Think of an extension, an extension, a new kitchen or a dormer window. The money you borrow for this provides the same benefit as the mortgage interest deduction.
This means that the loan for renovations and renovations to your home is extra advantageous for home owners due to the tax deductibility of the interest!
As of 1 January 2013, the “Act on the revision of the tax treatment of owner-occupied homes” came into effect. This law may affect a loan purchased for the improvement or renovation of the owner-occupied home, which now benefits from a tax deduction on the interest paid.
Outline of the law with regard to the deductibility of the Revolving Credit:
- For amounts drawn before January 1, 2013, the interest deduction remains unchanged.
- Amounts withdrawn after January 1, 2013 are subject to the new law and are no longer tax deductible.
- If an existing credit (from before 1-1-2013) is transferred to another credit, the old tax rules remain in effect. Regardless of the new type of credit.
If interest deduction is not used, nothing will change with the introduction of this law.
A Personal Loan is still tax-deductible if it is used for the purchase, improvement or renovation of the owner-occupied home
Box 3: If you want to borrow money for a consumer product, such as a boat or a car, the amount you borrow is deductible from the taxable capital. That means that the equity is reduced, which means that the homeowner has to pay less wealth tax. However, you must borrow at least $ 2,900 to be eligible for this benefit. In the case of double earners, this is double: $ 5,800.
As a home owner, do you want more information about this cheaper way of borrowing money? or call us directly. We are happy to calculate your benefit for you quickly