How to apply for a tax deduction for mortgage interest?

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Published: 09/07/2016

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A property deduction when purchasing real estate partially compensates for the costs associated with purchasing an apartment.

Likewise, the tax deduction on mortgage interest, although sometimes insignificant, still reimburses the costs associated with paying off the loan. Borrowers who receive official income can apply for it .

• What is a tax deduction for paying mortgage interest?
• How to calculate the deduction amount?
• Maximum amount to be refunded
• Ways to receive a deduction
• Necessary documents and algorithm of actions
• Tax deduction for shared ownership

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.

Legislative nuances of the return of mortgage interest in 2021

The main legal act of the Russian Federation regulating relations between the state and taxpayers is the Tax Code. Chapter 23 contains several articles that describe in detail the conditions under which a citizen has the right to compensation for expenses incurred by him from funds paid to the budget in the form of taxes.

According to the Tax Code of the Russian Federation, six types of deductions are legally established, each of which has its own characteristics:

• standard;
• social;
• investment;
• property;
• professional;
• when carrying forward losses from transactions with securities to future periods.

Citizens who have entered into a mortgage lending agreement with a bank receive the right to return taxes transferred to budget revenue on the basis of Article 220 of the Tax Code of the Russian Federation, which talks about property deductions. An important nuance is that there are two calculation options depending on the date of purchase of real estate:

• until 2014;
• after 2014.

Paragraph 3 of Article 220 of the Tax Code provides for the return of personal income tax on expenses for the purchase of a house, apartment, plot, etc., and paragraph 4 – on expenses for paying interest to the bank. In the first case, the maximum amount of spending on which the deduction is calculated is 2 million rubles, and in the second - 3 million rubles. This means that the citizen will receive 260 and 390 thousand rubles, respectively (13% of the specified maximum amounts).

Thus, the law provides for the possibility of obtaining a deduction if the borrower spent funds for the purpose of:

• repayment of interest on a mortgage or target loan, at the expense of which a residential house, apartment, room, land plot was built or purchased;
• repayment of interest on loans aimed at refinancing previous loans, also used for the purchase of residential real estate or a plot of land for construction.

Mortgage interest deduction

When purchasing a home with a mortgage, in addition to the main deduction, you can also receive a deduction for the loan interest paid and return 13% of the actual mortgage interest paid.

Note: Your mortgage payments are divided into two parts: principal payments and loan interest payments. You can receive this deduction only for payments on credit interest (payments on the principal debt will not be included in the deduction).

Wherein:

1. The right to deduct mortgage interest arises only at the moment the right of the main deduction arises. If the mortgage was issued earlier than the year in which the extract from the Unified State Register (or the Transfer and Acceptance Certificate) was received, then the deduction can still include all the interest you paid on the first mortgage payments.

Example: In 2021 Belsky G.I. took out a mortgage and entered into a share participation agreement for the construction of an apartment, and in 2021 he received an Apartment Acceptance Certificate. Despite the fact that the mortgage has been paid since 2021, contact the tax office minus Belsky G.I. maybe only in 2021. But he will be able to receive a deduction for all interest actually paid since 2018.

2. The maximum amount of deduction for mortgage interest is 3 million rubles (to be returned 390 thousand rubles).

Note: if the loan agreement was concluded before January 1, 2014, then the old rules apply and the amount of credit interest deduction is not limited.

Example: In 2021 Ulanova N.N. took out a mortgage loan of 10 million rubles from the bank and bought an apartment worth 12 million rubles. For 2010-2020 Ulanova N.N. paid 4 million rubles in mortgage interest.

In 2021 Ulanova N.N. filed a 3-NDFL declaration for 2021 with the tax office and declared the main property deduction in the amount of 2 million rubles. (to be returned 260 thousand rubles), as well as a deduction for credit interest in the maximum amount of 3 million rubles. (to be returned 390 thousand rubles).

Only mortgage interest actually paid for previous calendar years can be claimed as a deduction.

Example: In June 2021 Grechikhin S.D.
took out a mortgage and bought an apartment. In 2021, he can submit a 3-NDFL declaration for 2021 to the tax office to receive a basic deduction and a deduction for interest paid from July to December 2020. In 2022 Grechikhin S.D. will be able to submit documents for 2021 (add interest paid in 2021 to the declaration), in 2023 - for 2022, etc.

Who is entitled to a mortgage interest refund?

To get back part of the taxes paid to the state, the mortgagee must meet several requirements: be a resident of the Russian Federation, have official employment and “white” income, 13% of which goes to the treasury. As a rule, these are hired employees of state, municipal and commercial organizations and enterprises, as well as individual entrepreneurs who submit a declaration to the fiscal authority in form 3-NDFL, that is, who do not apply special tax regimes. Pensioners who stopped working and, accordingly, paying taxes, no more than three years ago are also entitled to a deduction.

For real estate purchased by spouses in a registered marriage, the procedure for calculating the amount of the deduction differs depending on whether the housing was purchased before January 1, 2014 or after. It was from this date that changes to the legislation came into force, according to which the tax deduction was no longer tied to the share of property. In order to receive a refund of personal income tax paid in the maximum possible amount, it is important to take into account the specific circumstances of each family.

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For what loans and borrowings can you get an interest deduction?

A deduction for credit interest can be obtained not only under mortgage agreements, but for any targeted loan aimed at the purchase/construction of housing (clause 4, clause 1, article 220 of the Tax Code of the Russian Federation).

For example, if you took out a loan from an employer and the contract states that the loan will be used to purchase a specific apartment, then you will be able to receive a tax deduction on the loan interest paid. If there is no such entry in the agreement, then despite the fact that you spent the loan on the purchase of housing, you will not be able to receive a deduction (Letter of the Ministry of Finance dated 04/08/2016 No. 03-04-05/20053).

Example: In 2021, Shilova K.O. I took out a loan from an organization to buy an apartment. The agreement clearly states that the loan was spent on the purchase of a specific apartment, therefore Shilova K.O. will be able to receive a credit interest deduction.

Example: In 2021 Tamarina E.M. I bought an apartment for 2 million rubles with a loan for consumer purposes in the amount of 1 million rubles. Since the loan is not intended for the purchase of an apartment, Tamarina E.M. will be able to receive a property deduction in the amount of 2 million rubles (for a return of 260 thousand rubles), but will not be able to take advantage of the interest deduction.

How to fill out the 3-NDFL declaration

To refund the tax paid from the borrower's income, you will need to prepare a tax return for the year.

The declaration must contain information about the date of transfer of real estate and the date of registration of ownership of it.

If the mortgage was issued for construction, then you need to indicate the purpose of construction and attach documents to the land plot.

The declaration contains all calculations. Why do you need to prepare seven sheets?

The first two sheets contain information about the taxpayer.

Then follows the first section, necessary for calculating the taxable base.

Section 6 contains data on the amount of income tax that will be refunded.

Sheet A contains information about the profit of an individual and the amount of tax paid for the tax period.

Sheet L contains information about housing purchased with mortgage funds.

The second part of the declaration consists of calculations of the amount of the deduction.

Why they refuse a mortgage, see the article: they refused a mortgage.

Video: return of mortgage interest:

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Documents for processing mortgage interest deductions

To receive a deduction for mortgage interest, in addition to the main documents for the transaction (see “Documents”), you must submit to the tax office a copy of the loan agreement and a certificate of interest paid.

The certificate can be obtained from the bank where you took out the mortgage. Some banks issue a certificate immediately, and some - a few days after a written request (it is better to check with your bank).

Sometimes the tax authority may also request payment documents for payment of mortgage interest (payment orders, bank statements, receipts, etc.). In this case, you can either provide documents (if available) or refer to the letter of the Federal Tax Service of Russia dated November 22, 2012 N ED-4-3 / [email protected] , which states that a certificate of interest paid from the bank is sufficient and additional payment No documents are required to receive a deduction.

What documents are needed to return mortgage interest?

An application for a refund of mortgage interest at the tax office will be processed quickly and without comments if you pay attention to the collection and preparation of documents. Required package includes:

• personal documents of the taxpayer (passport and TIN);
• property purchase and sale agreement;
• document confirming ownership of real estate;
• declaration (form 3-NDFL);
• mortgage payment receipts and certificate of current debt;
• certificate in form 2-NDFL (original);
• application for refund;
• loan payment schedule (as an appendix to the agreement);
• a certificate from the bank with the current account number for crediting.

From the above list it is clear that partial reimbursement of funds spent on the purchase of residential real estate is available to adult citizens of the Russian Federation who are officially employed and pay personal income tax.

However, the applicant for the deduction does not have to be an employee. Individual entrepreneurs who are subject to basic taxation and pay 13% of their income to the state budget have the same right to return these funds in the form of a mortgage interest deduction.

When housing is shared ownership of spouses, a marriage certificate (original and copy) is added to the list of documents.

If a tax deduction is expected to be received for past years, but the citizen does not have documents confirming regular payments, then the tax office will accept a bank account statement for consideration.

The amount of personal income tax refund on mortgage interest is calculated by employees of the fiscal authority based on the submitted documents and information on the payment of personal income tax. If there are no claims against the applicant, the deduction due to him is transferred to his account.

The above list of documents is not exhaustive; if it is necessary to clarify the circumstances of the case, additional information may be required. Most often this happens if a credit institution is declared bankrupt and restructured during the term of the agreement. This means that another legal entity becomes the creditor, therefore, documents on the assignment of claims are required.

Property deduction funds can be credited to the recipient’s card or issued at the cash desk.

Is it necessary to claim credit interest deduction immediately?

If you have not yet exhausted the main deduction, then you may not immediately claim a deduction for mortgage interest, so as not to submit additional documents to the tax authority. Once the main deduction has been exhausted, you can add information about the credit interest deduction to your return and attach the relevant documents.

Example: In 2021, Khavina M.V. I bought an apartment with a mortgage for 3 million rubles. Income of Khavina M.V. amount to 800 thousand rubles per year (the amount of tax withheld for the year is 104,000 rubles). In this case, in 2021 she will be able to claim the main deduction (since it makes no sense to claim interest).

In 2022, Khavina M.V. will continue to receive the main deduction. In 2023, since the main deduction will be exhausted, she will add to the declaration information about the interest paid from the beginning of payments (from 2020).

Who is entitled to

Citizens who meet the following criteria can receive a refund of mortgage interest:

Based on this, we can conclude that the main condition for obtaining a tax deduction is official employment.

A deduction is possible only from the amount generated from the employee’s income tax.

Thus, persons who do not have official earnings are not eligible to receive a tax deduction on mortgage interest.

Such persons include unemployed persons, disabled citizens, persons who receive benefits and who do not pay income tax. They cannot expect to receive interest back.

A deduction also cannot be made from an apartment transaction if the parties to the transaction are close relatives (parents, children or spouses).

Private entrepreneurs who work under a special tax system are also not entitled to a deduction.

When applying for a mortgage under a social program with funds from the federal budget, interest repayment is also not allowed.

For example, when participating in a state program for a young family, young parents are not entitled to a deduction.

The situation is exactly the same with other regional or federal programs.

You can make a refund if the property was purchased partially with personal funds.

Is it necessary to submit documents for deduction every year?

Often a situation arises when the main deduction has already been exhausted, and the amount of interest paid on the mortgage is small. To save time, you can not submit documents to the tax authority every calendar year, but submit them once every few years, including in the declaration all interest paid for these years.

Example: In 2021 Detnev L.P. I bought an apartment with a mortgage. According to the terms of the mortgage, he annually pays mortgage interest in the amount of 100,000 rubles. Income of Detnev L.P. per year exceed 2 million rubles. In 2021, Detnev filed documents with the tax authority and received a basic deduction and a deduction for interest paid in 2021. In 2021, Detnev may not file a return, but wait a few years and declare all the interest at once: for example, file documents in 2023 and receive a deduction for interest paid in 2021, 2021 and 2022.

Mortgage interest repayment procedure: main stages

The actions of the taxpayer, claiming compensation for part of the interest paid to the bank, coincide with those that he carried out when filing a deduction for the principal amount of the purchase of a home.

To receive back overpaid personal income tax, the borrower must:

• collect a package of documents, thanks to which the tax service will verify his right to a refund from the budget;
• submit an application to the tax office, which provides detailed information about the transaction for the acquisition of residential real estate and the mortgage agreement with the bank;
• wait for the results of the review of the submitted documents by the Federal Tax Service employees responsible for working with individuals;
• receive funds into your current account.

This procedure is general for applying for a deduction when buying an apartment, and if you want to return personal income tax for interest on the mortgage. The only difference is the need to indicate that the purpose of the appeal is to return part of the remuneration paid to the bank for the loan provided. You cannot do without evidence of depositing funds to pay off interest on a housing loan.

When refinancing a loan, there are some features of applying for a refund:

• when the borrower reimburses interest on the principal amount of the debt, repeating the procedure with refinancing is impossible: according to the law, only one request is approved;
• refinancing should be targeted exclusively for the purchase of residential real estate. Having an amount for personal needs may be a reason for refusal;
• The limitation of the tax base to 3 million rubles also applies in the event of concluding an on-lending agreement.

It is very difficult to independently understand all the nuances of return and deduction of mortgage interest. Federal Tax Service employees provide assistance to citizens free of charge, as part of their direct official duties, so if you have any questions, you should contact the nearest department.

Interest deduction for refinancing (loan refinancing)

If you refinance a loan with another bank, you can receive a deduction for interest on both the original and the new loan (clause 4, clause 1, article 220 of the Tax Code of the Russian Federation). At the same time, it is important that the new agreement clearly states that it was issued to refinance a previous targeted loan.

Example: Golovanov I.V. I bought an apartment in 2019 worth 3 million rubles (of which 1 million rubles were my own funds, and 2 million rubles were borrowed). In 2021, he refinanced the loan with another bank. Then, upon receipt of the interest deduction, Golovanov I.V. will be able to take into account the interest paid on the first and second loans.

How interest is returned

Before answering the question of how to calculate the amount of compensation due to the buyer of an apartment, it is necessary to understand who can claim a refund of part of the money paid.

The recipient of the funds can only be that citizen who has an official job, from the income from which his employer pays personal income tax. In this case, he will be able to apply for a tax deduction, i.e. reduce the amount of income that is used to calculate the tax amount. Obviously, the larger the deduction, the greater the personal income tax refund you can get.

So, if you take out a mortgage and have a regular taxable income, you may be entitled to a refund of 13% of the mortgage interest costs you incur.

The maximum deduction amount is 3,000,000 rubles; this means that you can return a maximum of 390,000 rubles. This rule has been in effect since 2014. There are no such restrictions for previously acquired real estate.

It should be noted that it is not the amount of the mortgage loan that is returned, but only 13 percent of the interest paid on it.

How to apply for a deduction

To return 13% on a mortgage loan and return interest you must:

• Collect a package of documents for property deduction
• Fill out the 3NDFL declaration
• Submit them to the tax office or receive a tax notice for the employer and present it at the place of work
• Receive a refund on your mortgage and interest on your bank card

Read more in the step-by-step instructions “The process of obtaining a property deduction for a mortgage”