Obtaining a tax deduction when purchasing an apartment with a mortgage

What is a tax deduction for a mortgage?

Support in the form of deductions is provided to all Russians who have purchased real estate. The method of purchase does not matter. Therefore, if a mortgage is issued, the borrower can also claim the money. At the same time, you can get them for the purchase itself, and a tax deduction on mortgage interest.

With a standard purchase without borrowing funds, the buyer can return a maximum of 260,000 rubles. The maximum deduction when purchasing with a mortgage is 650,000. This is 260,000 for the property and 390,000 for the interest paid to the bank.

The deduction itself is the amount of personal income tax paid by a citizen in the reporting year. For example, if you want to take a deduction in 2021 for a previous year, the full year of 2021 is taken into account. The amount of taxes your employer paid for you is the amount you can get back. But within the limits of the amount established by law.

What costs can be reimbursed?

A tax deduction on the cost of housing or a property deduction is a benefit that allows you to reduce the tax burden on individuals who purchase residential real estate in the Russian Federation. This benefit also applies to interest on a mortgage taken out for the purpose of purchasing this property. An individual has the right to use these deductions once in his life.

The specifics of obtaining a deduction for the cost of housing and interest paid on a mortgage are regulated by Article 220 of the Tax Code (TC) of the Russian Federation - “Property tax deductions”. According to the provisions of this article, using a tax deduction you can compensate for:

• funds paid for the purchase of a residential building, apartment, room or shares thereof;
• expenses for finishing the premises if it was purchased without it;
• costs of developing projects and estimates;
• payment for installation work and building materials necessary for the construction of a residential building;
• purchase of land if it serves as the basis for the construction of housing or is purchased together with the house;
• deduction of interest on a mortgage, provided that the intended purpose of the loan is the purchase or construction of housing.

The above expenses are not compensated if:

• they are financed from the state budget;
• they were incurred by other individuals, institutions, organizations;
• the parties to the transaction are relatives, family members or other interdependent persons.

Mortgage borrowers file two separate deductions

If a citizen buys an apartment with personal funds, he receives the right to receive 13% of the cost of housing, but not more than 260,000 rubles. And the mortgage borrower immediately after the completion of the purchase and sale transaction receives this right.

But according to the law, he can separately return tax on mortgage interest. This is also 13%, but with interest paid by the bank. The maximum amount is 390,000 rubles for the entire period of repayment of the mortgage loan.

What we end up with:

1. Already in the next tax year, the borrower can apply for a standard deduction for the purchase of real estate up to 260,000 rubles. For example, if the purchase of an apartment was made in September 2021, in 2022 you can return the personal income tax for September-December 2021.
2. As you pay off the loan to the bank, you can apply for a second deduction - a property deduction for mortgage interest. You can submit an application for it at least every year, or even after 5 years you can receive it all at once - there are no time limits.

The law does not limit the deadline for filing applications for a tax refund on a mortgage; it is not necessary to file a return for the next year after the purchase. You can send a request even after 10 years, but personal income tax is returned only for the last 3 years.

That is, if you bought an apartment on credit in September 2021, it is better to apply for a deduction in 2023, then you will get back both the full 2022 deduction and the last months of 2021. And some wait 3 years to receive everything at once in a large amount.

You don't have to go to the tax office

You can also receive a deduction at your place of work. To do this, you do not need to wait until the year following the purchase of the apartment. The order is as follows:

• write a free-form application to your tax office requesting a tax deduction;
• prepare copies of documents evidencing the purchase of real estate;
• submit the application and copies of documents to the tax office;
• after 30 days, receive a notification from the inspectorate about the right to deduct;
• submit a notification to the accounting department at the place of work.

In this case, the tax deduction is returned in parts - it simply will not be withheld from subsequent wages, that is, during the period of the refund, your salary will increase by 13%. Not everyone is comfortable with this.

How much can you get in the end?

Mortgage borrowers can count on a maximum of 650,000 rubles. And this is not a mythical amount; many actually receive it if the object is more or less expensive. For example, in the capital, St. Petersburg and Sochi, the cost of residential meters is high, so most often borrowers there repay the maximum amount.

We will take into account more real figures. Let’s take, for example, a simple city with a population of one million and an ordinary, average borrower and calculate how much he can receive in the form of a deduction on the mortgage and interest on it.

Let’s say our borrower receives a pre-tax salary of 70,000 rubles monthly. That is, his annual income for 2021 is 840,000 rubles. Of these, the employer sends 13% to the Federal Tax Service. Over the course of a year, this amounts to 109,200 rubles.

That is, in 2021, our potential borrower can apply to the Federal Tax Service and return the mortgage tax in the amount of 109,200 rubles.

Initial data on the housing loan itself:

• cost of the object - 3.5 million rubles;
• loan amount taking into account the down payment - 3 million rubles;
• the mortgage was issued for 15 years at 8% per annum;
• in this situation, the overpayment in the form of interest will be 2,160,000 rubles.

As a result, a citizen can return 13 percent of the mortgage from two amounts:

1. From the cost of the apartment 3,000,000 rubles. 13% of this amount is 390,000 rubles. But according to the law, you can return a maximum of 260,000. That is, our buyer will receive the maximum for this deduction.
2. From interest on the mortgage, which amounted to 2,160,000 rubles. 13% of this amount is 280,800 rubles. That is, it will not be the maximum amount of 390,000.

As a result, our average borrower can return 260,000 for the purchase of an apartment and 280,800 for interest. That is, the amount allotted to him by law is 540,800 rubles.

Property tax

When registering a purchased apartment with a mortgage, an entry is made in the Unified State Register that this property is collateral, but is the property of the borrower

. Such a right of ownership restricts the owner from performing actions with this object. It cannot be sold without the lender's permission. But according to the law, the owner of the mortgaged property is the borrower; he must bear the financial burden in connection with the existence of such property rights, including payment of property taxes for individuals.

When can you not pay?

In this type of taxation of citizens, a system of preferential categories is used. Borrowers who pay off a mortgage are not exempt and are not exempt from paying property taxes to the state.

But you can not contribute money to the treasury at all for this type of tax or take advantage of a discount if you have such a right established by the federal and regional authorities.

Federal beneficiaries exempt from such payments are:

1. citizens who participated in wars;
2. those involved in the liquidation of the Chernobyl accident;
3. persons with disabilities, etc.

To obtain this right, you need to contact the territorial NI, write an application, attach documents confirming the benefit and ownership of the mortgaged housing.

Benefits for the amount of taxation of real estate or its share are applied directly to the citizen who has the right to use the benefits in accordance with the law.

Who will not be able to receive a tax deduction on a mortgage in 2021

A citizen of the Russian Federation who pays personal income tax can receive money from the state. That is, this is an employed person. He has an official place of work and can order a 2-NDFL certificate, where the Federal Tax Service will see the amount of tax paid, from which the calculation is made.

But if the mortgage borrower does not have an official job, then he does not pay personal income tax, and therefore cannot return it. This is a very real situation: for example, when applying for a loan, a person was working officially, but soon quit

If the borrower is an individual entrepreneur on a simplified taxation system, he will also not be able to apply for a mortgage deduction. The fact is that such individual entrepreneurs do not pay personal income tax, but only this tax can be returned by law.

More about taxation

In accordance with the legislation of the Russian Federation, the obligation to pay taxes to the state treasury every year applies to individuals who own real estate. The Tax Code of the Russian Federation describes the categories of citizens exempt from this obligation. This document also contains liability measures applicable to tax evaders and tax debtors. This means that an individual who has become the owner of real estate, in accordance with Article 400 of the Tax Code of the Russian Federation

becomes a tax payer on the purchased real estate.
An individual owner of real estate can make a fiscal payment at its cadastral price within the time limits regulated by the tax authority - annually no later than October 1.
If a mandatory payment is made late, the tax authorities will consider it overdue. The main question that borrowers are interested in is whether they need to pay tax on a mortgaged apartment? The Ministry of Finance of the Russian Federation answers this question unequivocally - yes, without fail.

The following types of real estate are subject to tax:

1. house;
2. country house;
3. apartment;
4. garage;
5. room;
6. other premises and structures.

In addition to real estate as a whole, shares of an object that is owned are subject to tax.

We consider the first deduction - for the purchase of an apartment

We will consider the same situation with our potential borrower, which is described above. According to the law, for the very fact of purchasing an apartment for 3 million, he can return personal income tax in the amount of 260,000 rubles.

Advice for mortgage borrowers. It is better to first receive the required deduction for the purchase of housing. Once this deduction has exhausted itself, apply for a second one - for interest on a mortgage loan. During this period, a larger base of interest paid to the bank will already accumulate.

The law does not establish time limits; you can submit a declaration to the Federal Tax Service at least the next year after purchase, at least after 3-4 years. The main condition is that the personal income tax paid is considered for the last 3 years. For example, if you submitted a request in 2024, income from 2021, 2022 and 2023 will be taken into account.

Initial data of our borrower:

• he is entitled to a deduction for the purchase of an apartment in the maximum amount of 260,000 rubles;
• he bought an apartment with a mortgage in September 2021;
• technically, he can submit an application on any day of 2021 and return the personal income tax paid for September-December 2021. But the amount there will be small, so let’s take another period;
• A citizen applies for a personal income tax refund in 2022, that is, he has 12 months from 2022 and 4 from 2021.

The citizen orders a 2-NDFL certificate from the employer for this period, where the amount of taxes paid by the employer is displayed. For example, with a salary of 70,000 per month, the total income for 16 reporting months is 1,120,000. A 13% tax on this amount is 145,600 rubles.

In 2022, our potential borrower can receive from the state 145,600 rubles out of the required 260,000.

But a citizen has the right to receive exactly 260,000, and he is not deprived of this right. The remaining 114,400 rubles are carried over to the next period. That is, a citizen can apply again in 2023 and receive the money again. And if the amount is not exhausted again - in 2024.

Some mortgage borrowers make a tax refund on the mortgage for the apartment itself every year, others - once every 2 or 3 years in order to immediately receive a more significant amount. Here, as you wish, there are no legal restrictions. You can apply at least after 10 years.

Main deduction

When purchasing an apartment/house using mortgage funds, you can receive two tax deductions: the main deduction (clause 3, clause 1, Article 220 of the Tax Code of the Russian Federation) and a deduction for mortgage interest (clause 4, clause 1, Article 220 of the Tax Code of the Russian Federation).

The main deduction when purchasing an apartment with a mortgage is no different from the deduction for a regular purchase. We will not consider it in detail, but will only recall the main points:

• The maximum deduction amount is 2 million rubles. You can return 13% of this amount - 260 thousand rubles. Read more “Amount of deduction when purchasing a home.”
• The right to deduction arises after receipt of the Acceptance and Transfer Certificate of the apartment (when purchasing under an equity participation agreement) or the date of registration of ownership according to an extract from the Unified State Register (if purchasing under a purchase and sale agreement). You can submit documents for a deduction to the tax authority at the end of the year in which the right to it arose. Read more “Information on property deduction”, “When the right of deduction arises”.
• You can include both your own and borrowed funds in the deduction. From a legal point of view, loan funds are also considered your expenses.

The list of required documents and the process of obtaining a deduction are described in the articles: “List of documents for obtaining a deduction” and “The process of obtaining a deduction.”

Example: In 2021 Dezhnev G.S. took out a mortgage loan from the bank in the amount of 2 million rubles and bought an apartment worth 2.2 million rubles. The certificate of registration of ownership was also issued in 2021.

In 2021 Dezhnev G.S. filed a 3-personal income tax return for 2021 with the tax office and declared the main deduction in the maximum amount of 2 million rubles (towards a return of 260 thousand rubles) despite the fact that Dezhnev spent only 200 thousand rubles of personal funds. He can also claim a deduction for mortgage interest.

Mortgage interest deduction - consider the second deduction

Refunds of mortgage interest are processed separately by the tax office. Typically, borrowers first receive what they are entitled to for the very fact of purchasing real estate, and only then return personal income tax on the interest paid. This is more convenient - a more interesting amount of interest will have time to calculate the deduction.

So, our potential borrower first applied for a deduction for the purchase of an apartment and received 260,000 rubles from the state over 2 years. Next year, he applies to the Federal Tax Service to begin receiving the 280,800 rubles due to him from the example above.

But there is an important point here - the calculation of the deduction base is formed on the basis of interest already paid to the bank. That is, you will not receive the entire amount at once. The last money is after the mortgage is completely closed.

Our potential borrower received a deduction for the apartment in 2022 and 2023. In 2024, he can get a tax deduction for mortgage interest for the first time. The interest he paid to the bank in 2021, 2021 and 2022 will be taken into account.

You can calculate these percentages yourself in the payment schedule, if you have followed it. In our case, the schedule for 2020-2022 looks like this:

The “Accrued Interest” column is the base from which the calculation will be made. You need to sum up the interest for the entire allotted period. But in any case, the applicant will receive from the bank a certificate of interest paid for the reporting period.

When you first start paying off your mortgage, your monthly payments mostly consist of interest. Therefore, the deduction for the first years will be higher, and as the payments end, it will be significantly reduced, so the percentage of interest in payments will decrease.

For example, our borrower paid the bank 750,000 rubles in interest for the period from October 2021 to December 2023. 13% of this amount is 97,500 rubles. This is exactly how much a citizen will receive in 2024.

But here we need to remember that our potential borrower received a tax refund for the purchase of an apartment in 2022 and 2023, that is, personal income tax for these years was returned. In 2024, the amount of the tax deduction also cannot exceed the amount of taxes paid for that year. If the full 97,500 is not due, the balance is carried forward to subsequent periods.

Applying for interest deduction every year is not entirely justified. The amounts will be small. Therefore, many borrowers make a personal income tax return of this type once every 3 years, each time requesting a certificate from the bank indicating the amount of interest for this period.

As a result, the borrower receives a tax deduction for the apartment under the mortgage throughout the entire loan repayment period. The final deduction for interest is issued upon full repayment of the mortgage.

Income tax

The seller of the apartment is required to pay income tax. The amount of income tax is generally 13% of the value of the property minus 1 million rubles. That is, when selling an apartment for up to 1 million rubles. inclusive, no tax is paid. Also, amounts of any size received from the sale of real estate that has been owned for more than 3 years are not subject to taxation. Thus, the owner of real estate, after 3 years from the date of its acquisition (receipt by inheritance, gift, etc.), can freely sell real estate at any value, without fear of overpaid taxes.

Schedule for receiving tax deductions for our borrower’s mortgage

As is already clear, income tax on a mortgage is returned in installments. And in our case, the described borrower receives a personal income tax refund in this way (for convenience, we simply take the pre-tax salary of 70,000 rubles every month for the entire loan repayment period. It is clear that the real numbers will be different every month and year):

1. In 2022, he will receive 145,600 rubles out of the 260,000 due to him. This is the refunded tax for September 2021 - January 2021.
2. In 2023, he will receive 109,200 rubles for 2022. And he will still have 4,200 rubles left to “recoup” the amount of 260,000.
3. In 2024, he applies for these 4,200 and can immediately apply for a second deduction - for mortgage interest paid during the period October 2021 - January 2023. According to approximate calculations, he is entitled to 97,500. 97500+4200=101700 . If for 2024 the amount of personal income tax paid is more than this amount, he will receive both deductions in full.

Then you can submit documents every 3 years for a tax deduction on the mortgage interest. The last application is for the next year after closing the mortgage.

If the borrower closes the mortgage early, personal income tax is returned only on the interest actually paid.

How to get a tax deduction on a mortgage

There are two options - submit an application to the employer’s accounting department or to the Federal Tax Service. But in the first case, within the prescribed amount, the tax will simply be removed from your salary, and you will receive more. To get a large amount in your hands, you need to contact the Federal Tax Service.

Documents for a tax deduction for a mortgage (for the apartment itself):

• an extract from the Unified State Register of Real Estate, which confirms ownership;
• documentary evidence of payment for the purchase, for example, a receipt from the seller;
• certificate 2-NDFL for the period for which you want to receive a deduction;
• if we are talking about spouse-owners who want to distribute the deduction among themselves, their application is required;
• marriage certificate if the applicant is married.

In the application, the citizen indicates the details of the account to which the money needs to be transferred.

The procedure for returning personal income tax for a mortgage:

1. Fill out the 3-NDFL declaration (a separate document is created for each year). To do this, you can contact the company or fill it out yourself. Here are instructions on how to draw up a 3-NDFL through State Services.
2. Calculate the required deduction. Federal Tax Service employees will then double-check (the amount will be taken into account by you when submitting your application).
3. You submit the package of documents along with 3-NDFL to the Federal Tax Service at your place of residence.
4. The Federal Tax Service checks the declaration for 3 months. If everything is in order, the money is transferred to the account specified by the citizen within 30 days.

If we are talking about obtaining a deduction for mortgage interest, then a certificate from the bank about the amount of interest paid for the stated period is added to the above documents.

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Where to apply for compensation

So, you are ready to file a tax deduction; all that remains is to decide where and what documents need to be submitted. There are three options for the development of events:

1. It is necessary to visit the tax authorities at the place of registration and submit all the necessary documents. Please note that they always have a lot of work to do, the inspector will consider your application for at least 3 months, if the decision is positive, the money will be transferred within a month.
2. In the same way, you can submit papers to the MFC.

You can also submit a tax deduction application to your employer.

FAQ

How many times can you receive a property deduction when purchasing an apartment with a mortgage?

The right to receive a tax deduction for the purchase of real estate and for mortgage interest arises multiple times, but within the limits of 260,000 and 390,000, respectively. If the limits are not exhausted within one transaction, they can be received on subsequent transactions.

Can both spouses return the tax at once when purchasing an apartment with a mortgage?

The property belongs to them together, and they are both legally entitled to receive tax deductions up to the limits established by law. As a result, they can simultaneously submit applications to the Federal Tax Service, payments will go to both, but within the amount stipulated in the transaction.

Is it possible to apply for two deductions at once: both for the purchase and for the interest?

You can, if the personal income tax you paid for the stated period allows you to do this. You can receive both deductions at once in full or one in full and one in part.

How can I get my mortgage interest back through a deduction?

You need to fill out a 3-NDFL declaration, get a 2-NDFL certificate at work, get a certificate from the bank about interest paid for a given period and contact the Federal Tax Service with an application to receive a deduction for mortgage interest.

Is it possible to repay mortgage interest in one amount?

Receiving interest deductions usually goes hand in hand with paying off your mortgage. The refund is made for the amount of interest that you have already paid to the bank. You will not receive a deduction immediately for the entire overpayment according to the schedule. You can submit an application after paying off the loan in full, but personal income tax for the last 3 years will be taken into account, or send applications to the Federal Tax Service every 3 years and receive the money in installments.

Sources:

1. Government services: Property tax deduction.
2. Federal Tax Service: Property deduction when purchasing property.

about the author

Irina Rusanova - higher education at the International East European University in the direction of "Banking". Graduated with honors from the Russian Economic Institute named after G.V. Plekhanov with a major in Finance and Credit. Ten years of experience in leading Russian banks: Alfa-Bank, Renaissance Credit, Home Credit Bank, Delta Credit, ATB, Svyaznoy (closed). He is an analyst and expert of the Brobank service on banking and financial stability. [email protected]

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