Tax Return: Can Mortgages and Loans be Deducted?

Tax deductions 2018 : what expenses can be deducted from the tax return?

This is a question we must ask ourselves when we are preparing to complete the tax return.

730 model income tax return

For both the Model 730 and the Income Model there are in fact some expenses incurred during the year that can allow us to pay less taxes.

Can mortgages and loans be deducted? The answer is not a dry yes or a no. Some distinctions must be made. Among the eligible expenses between the tax deductions 2018 mortgages and loans fall under specific cases.

We have already explained how the pre-compiled income tax returns with its advantages and risks ( read here ), also listing the main changes in terms of deductible expenses. The next step is understanding, for example, if the loan we pay for the house can allow us to save a little. Or if there are tax deductions for those who have applied for personal loans.
Let’s make it clear once and for all on loans, mortgages and tax deductions!

The advantages of tax deductions

The advantages of tax deductions

First, however, a clarification. Why is it important to know if mortgages and loans can fall under the 2018 tax deductions? Soon said: tax deductions are the sums of money that each of us has the right to subtract from taxes on income that owes to the State.

The Revenue Agency clarifies each year what the “deductible” expenses are. If we present them at the time of the tax return we will get a tax discount.

Personal loans and tax deductions

Personal loans are not included in the expenses that we can deduct. The reason is simple. A personal loan is requested for private needs, so for tax authorities it does not give the right to any deductions. No reimbursement of interest on the personal loan is envisaged.

However, there are some special cases in which loans can be deducted :

  • freelancers (self-employed workers or sole proprietorships) who apply for a loan for professional activity;
  • loans and agricultural loans ; the interest expense is deducted for a sum less than or equal to the declared agricultural income and dominical income.

Mortgages and tax deductions

Mortgages and tax deductions

The speech changes for mortgages. Here we can talk about tax deductions and save a little money. The Inland Revenue has explained that “the interest expense, the accessory charges and the revaluation quotas paid in dependence of the mortgages give the right to a deduction from the gross tax in the amount of 19%.

The deduction applies to a maximum amount of 4 thousand euros :

  • for each holder if the mortgage was stipulated before 1993
  • overall if the mortgage was stipulated after (in this case there will be the subdivision between the holders of the loan).

Which mortgages and what expenses can be deducted

Which mortgages and what expenses can be deducted

In model 730 different types of mortgages stipulated in recent years can be deducted. Here is a summary of what they are.

  • Mortgages for the purchase of the main residence (line E7)
  • Mortgage loans stipulated before 1993 for the purchase of properties other than the main residence (lines E8 to E10, code 8)
  • Loans contracted in 1997 for maintenance, restoration and renovation (lines from E8 to E10, code 9)
  • Mortgage loans contracted since 1998 for construction and renovation of the main house (lines E8 to E10, code 10)
  • Mortgages and agricultural loans (lines E8 to E10, code 11)

At the same time it is good to know what the accepted expenses are for mortgages. These are the interest expense and accessory charges paid in 2017 (we go with the cash criterion regardless of the maturity of the installment).
Among the accessory charges must be counted:

  • Higher amounts paid due to changes in currency exchange for mortgages in other currencies
  • Brokerage commission due to credit institutions
  • Tax charges (tax for registration or cancellation of a mortgage, substitute tax on capital lent)
  • Commission for installment spread in cash loans
  • Notary fees related to the signing of the loan agreement

If the mortgage is registered to more than one person, each holder takes advantage of the tax deduction relating to his / her share of interests within the limits set by the stipulated loan. This means, therefore, that the share of interest incurred for any tax-dependent family members can not be deducted.

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