Property tax deduction when purchasing an apartment (nuances)

We recommend filling out the 3-NDFL declaration in the online personal income tax service.

Purchasing residential real estate is an expensive proposition. Trying for the benefit of the people, our state provides excellent assistance in saving on the purchase of housing - it returns 13% of the money spent. It is quite simple for a citizen to receive a tax deduction if he knows the basics of this process.

Who can receive a property tax deduction

Firstly, only citizens of the Russian Federation who purchased an apartment in Russia can count on the benefit. It is important that you pay your own money for the housing or take out a mortgage.

Secondly, the deduction is provided to those taxpayers who have taxable income at a rate of 13%. To do this, you need to receive an official salary and pay personal income tax on it.

For example, if an individual entrepreneur uses a simplified taxation system, then he will not be able to receive a tax deduction, since “simplified” ones are exempt from paying personal income tax. On the same basis, self-employed people (payers of professional income tax) are deprived of this benefit.

However, both individual entrepreneurs using the simplified tax system and self-employed people can receive additional income subject to personal income tax. For example, they can earn money from their own activities and at the same time work officially in the company. In this case, they will have the right to receive a property tax deduction in the tax period in which income taxed at a rate of 13% was received.

If a taxpayer bought an apartment in 2021 and received a registration certificate in 2020, then starting from 2020 he has the right to a deduction. Therefore, as soon as you have received documents confirming your rights to real estate, begin collecting the necessary papers to receive a property tax deduction.

Taking into account the cadastral value

When calculating personal income tax, one of the basic indicators is the income received from the sale of real estate. According to the current tax legislation, this basis amount can be reduced by 1,000,000 rubles. This will be the property tax deduction in 2020.

Last year, taxpayers, taking advantage of this loophole, “simplified their lives”: they indicated in the purchase and sale agreement the sales amount of 1,000,000 rubles, so as not to pay personal income tax. But now this trick won't work. The taxpayer has the right to indicate any amount. But if the declared price of the property being sold is less than its cadastral value multiplied by a reduction factor of 0.7, then the tax will be levied on the last amount: the cadastral value multiplied by 0.7.

In cases where the taxpayer deliberately underestimates the sale price of a property, the tax authorities have the right to make additional personal income tax assessments. But the property tax deduction remains in the amount of 1,000,000 rubles.

There are exceptional cases when the cadastral valuation of the transaction object is not recorded on January 1 of the year in which it is necessary to carry out state registration of the transfer of ownership. Then the provisions on cadastral value are ignored.

What documents are needed to receive a deduction?

This kit includes:

• passport;
• income certificate in form 2-NDFL, which indicates income and taxes paid for the corresponding year;
• Declaration 3-NDFL, from which it is clear that property was acquired, taxes were paid and that a certain amount of property tax deduction is due.

For the apartment you will need:

• apartment purchase agreement;
• an act on the transfer of an apartment to the taxpayer or a certificate of state registration of the right to an apartment.

If the apartment was purchased through a shared participation agreement:

• an agreement on shared participation in construction or an agreement on the assignment of the right to claim;
• an acceptance certificate or other document confirming the transfer of the object from the developer to the participant;
• copies of payment documents (for example, payment orders, bank statements about the transfer of money from the buyer’s account to the seller’s account).

If the apartment was purchased on the secondary market:

• agreement on the purchase of an apartment (for example, a purchase and sale agreement);
• copies of payment documents (for example, payment orders, bank statements about the transfer of money from the buyer’s account to the seller’s account);
• documents confirming ownership of the apartment (for example, a certificate of state registration of rights).

If you bought a house and land:

• agreement for the purchase of a land plot with a residential building;
• copies of payment documents (for example, payment orders, bank statements about the transfer of money from the buyer’s account to the seller’s account);
• documents confirming ownership of a residential building (for example, a certificate of state registration of title);
• documents confirming ownership of a land plot (for example, a certificate of state registration of rights).

Until 2014, property tax deductions were issued for only one property, but now it can be received from several apartments. The limit on the amount remains the same - no more than 2 million rubles. For example, if an apartment costs 1.5 million rubles, then you can get a deduction of another 500,000 rubles. from the next apartment.

Until 2014, there were no restrictions on mortgage interest. For example, from an overpayment of 10 million rubles. it was possible to get a deduction for the entire 10 million rubles. Starting from 2014, a limit was introduced on the deduction of mortgage interest in the amount of 3 million rubles.

Tax deductions can be obtained not only for real estate, but also for mortgage interest.

For this you need the following documents:

• loan agreement with annexes and additional agreements thereto;
• documents confirming payment of interest on the mortgage (for example, a certificate from the bank).

The deduction is issued for the interest actually paid. For example, if a mortgage agreement was signed for 10 years 3 years ago, then a tax deduction is issued for the amount of interest paid for 3 years. Interest paid in the following year will be tax deductible in the following year.

Documents for purchasing a residential building and land plot

There is one feature of deductions for the purchase of an apartment or house. When, in addition to the actual cost of the property, the deductions also include the costs of finishing or completing it, these actions must be documented. That is, present CCP receipts, contract agreements with builders for finishing work, etc.

And these documents will be required to confirm the fact of purchasing a house and a plot of land:

• seller's receipt and other documents confirming the fact of payment;
• document on ownership of a land plot and a residential building;
• agreement for the purchase of these types of real estate plus all additional agreements and annexes.

Amount of deduction and maximum expenses

There are some nuances with the registration of deductions depending on the type of property.

• Sole proprietorship . When buying an apartment, you can return the property tax deduction, but not more than 2 million rubles. 13% of the cost is refundable. By purchasing an apartment for 2 million rubles, you can return 260,000 rubles. previously paid taxes, and for 1 million rubles. — 130,000 rub. If the purchase price is more expensive, the refund amount will not change.
• Common shared ownership . For example, when purchasing ½ share in an apartment for 3 million rubles. You can apply for a deduction of no more than 1.5 million rubles.
• Common joint property . Until 2014, spouses for two could receive a deduction of no more than 2 million rubles. Therefore, it was more profitable to issue a deduction for only one of the spouses, and the other could receive another tax deduction in the future. Since 2014, the limit is 2 million rubles. are established not per property, but per person. For example, if the cost of an apartment is 5 million rubles, then each spouse can receive a deduction of 2 million. If the apartment costs 3 million rubles, you can agree to make a deduction of 1.5 million rubles, and then each 500,000 rubles remain, which can be used for the following objects.

Who is entitled to it?

The first question faced by citizens who want to receive a tax deduction is: “Who is entitled to it?” The current legislation stipulates that all persons who work officially and pay monthly income tax on their earnings can count on it. It is this 13%, transferred to the tax office, that you can return in the event of:

• 
  acquisition of residential premises;

• construction of a new house;
• carrying out repair work in the purchased residential premises (it is necessary to preserve and provide documentary evidence of the work performed and purchases in the form of acts, receipts, etc.);
• purchasing real estate on credit (to pay off interest).

Those who took advantage of this opportunity earlier (before 2014), exhausted the legal limit, or bought real estate from close relatives or with the participation of an employer are not entitled to receive a tax deduction. There is also no provision for refunds to officially unemployed persons and citizens who took advantage of state support programs, including maternity capital, when purchasing an apartment or house.

Attention! If you purchased a home and used your right to a tax deduction before 2014, you will no longer be able to use it, no matter how much you received.

After 2014, changes in legislation came into force that tied the possibility of obtaining a tax deduction to the maximum amount of compensation. Thus, it has become possible to use this right until the limit of 260 thousand rubles is completely exhausted.

Such changes have become especially convenient for co-owners of real estate. When registering an apartment or house for several owners, each of them receives the right to obtain a tax deduction taking into account the value of its part in the common property. Previously, each of them could receive compensation in an amount not exceeding 130 thousand rubles and lost the opportunity to exercise the right to deduct in the future. Now they are not limited by the number of transactions, but, like others, can receive compensation from the INS up to the exhaustion of the limit.

But situations often arise when pensioners purchase real estate. Is it possible to apply for tax compensation in this case? Modern legislation allows this in two cases:

• if the pensioner continues to work;
• the citizen is not currently working, but worked for the last 3 years before he became eligible for the deduction.

How to calculate the amount of deduction

The maximum deduction amount is: 2,000,000 x 13% = 260,000 rubles. This amount can be applied to several purchased residential properties if their total cost is less than 2 million rubles. (clause 3 of article 220 of the Tax Code of the Russian Federation).

If real estate is purchased by spouses, then each of them has the right to a maximum deduction amount of 2 million rubles.

If a loan was taken out to purchase property, you can receive a deduction of no more than 3 million rubles for interest. The maximum deduction amount is: 3,000,000 x 13% = 390,000 rubles.

If you took out a mortgage

A common way to purchase real estate is through a mortgage. In this case, in order to receive a property deduction, you should stock up on these papers:

• loan agreement and additional agreements and appendices thereto;
• account statement, bank statement or other document confirming payment of interest on the loan.

From January 1, 2021, amendments to Art. 220 Tax Code of the Russian Federation. According to the innovations, a property deduction can be obtained if the taxpayer pays off interest on a housing loan and has received money under programs to assist borrowers in difficult financial situations.

After the sale of housing, which was received free of charge with partial payment or under a gift agreement, you can reduce the tax base on income from the sale. To do this, you can take into account expenses in the form of amounts on which the citizen paid personal income tax when receiving the property.

What is taken into account as expenses when calculating deductions

If you purchase an apartment, then the costs take into account:

• the purchase of real estate itself;
• acquisition of rights to an apartment in a building under construction;
• spending on finishing materials;
• apartment finishing work, development of design and estimate documentation.

If you buy a house or build one, then the costs include:

• development of design and estimate documentation;
• purchase of building materials, as well as finishing materials;
• the purchase of a house itself, including at the stage of unfinished construction;
• house construction and finishing work;
• carrying out electricity, water and gas supply and sewerage.

What expenses can be reimbursed?

Property tax deduction can be claimed for expenses on:

1. Construction or purchase of housing (house, apartment, room (share in them));
2. Purchase of a land plot for construction or with a residential property already located on it;
3. Payment of interest on loans issued for the construction or purchase of real estate, as well as payment of interest on loans received to refinance previously taken loans for construction or purchase of real estate;
4. Work related to the finishing or repair of housing (if it was purchased under a contract without finishing), as well as the development of design (estimate) documentation and the purchase of finishing materials;
5. Providing electricity, water, gas and sewerage to a residential property.

Property tax deduction is not provided

if:

1. Residential real estate was purchased from interdependent
   in relation to the taxpayer (spouse, close relatives, employer, etc.).
2. The construction (purchase) of residential real estate was paid for by other persons
   or using budget funds (maternity capital, loans, etc.).
3. The right to deduction was exercised earlier.

Stages of obtaining a property tax deduction

So far the process consists of four stages. But most likely, already in 2021, a bill will be adopted that will amend the Tax Code in terms of introducing a simplified procedure for obtaining tax deductions for personal income tax. The deadline for submitting amendments is February 24, 2021.

Step 1. Collect copies of all necessary documents

Copies of documents confirming the right to housing:

• when constructing or purchasing a residential building - a certificate of state registration of the right to a residential building or an extract from the Unified State Register;
• when purchasing an apartment - a purchase and sale agreement, an act of transfer of the apartment to the taxpayer, a certificate of state registration of ownership or an extract from the Unified State Register of Real Estate;
• when purchasing a land plot for construction or ready-made housing - a certificate of state registration of ownership of the land plot and a certificate of state registration of ownership of a residential building;
• when paying off interest on a mortgage - a mortgage agreement, a schedule for repaying the loan and paying interest on the use of borrowed funds.

Until 2021, to receive a deduction, it was enough to provide a certificate of state registration of the right. But in 2021, there were changes in confirming the right to a property deduction when purchasing real estate (Federal Law dated July 3, 2016 No. 360-FZ). If you purchased real estate after July 15, 2021, then the right to a property deduction will have to be confirmed with an extract from the Unified State Register.

Copies of payment documents:

• confirming expenses for the acquisition of property (receipts for receipt orders, bank statements about the transfer of funds);
• evidence of payment of interest under the mortgage agreement (certificate of interest paid for using the loan).

Stage 2. Take certificate 2-NDFL from work

Just contact the accounting department - they will prepare it.

Step 3. Fill out the 3-NDFL declaration

You will need data from your passport, 2-NDFL and other documents.

Please note that Form 3-NDFL is updated annually, but you must use the one that corresponds to the year for which the personal income tax is being returned.

On its website, the Federal Tax Service provides an example of filling out a tax return in Form 3-NDFL.

If the property was purchased as a common joint property, you must provide:

• a copy of the marriage certificate;
• a written statement on the agreement of the spouses on the distribution of the amount of property tax deduction.

Please note: the new form 3-NDFL includes a statement for a refund of the amount of overpaid tax. It also needs to be filled out so that the tax office can transfer the amount to you.

Until 2021, the application had to be filled out separately using a special approved form (Order of the Federal Tax Service of the Russian Federation dated February 14, 2017 No. ММВ-7-8 / [email protected] ).

In your application please indicate:

• Name of the bank;
• bank account details to which the amount must be transferred (the amount in the application must match the amount indicated in the declaration).

Step 4. Submit a set of documents to the tax office

The package of documents is submitted either to the tax office at your place of residence in person, or through your personal account on the Federal Tax Service website. Specialists check documents within 3 months. If any questions arise, you will be contacted and asked for original documents. If everything is in order, the money will be credited to your account. In general, the procedure for obtaining a property tax deduction takes a maximum of 4 months.

How does the “additional use” option work?

It is no secret that real estate prices are rising; logically, property deductions for property purchases and other transactions should also increase somewhat over time. But will the amount of the deduction change if, for example, the taxpayer partially took advantage of this opportunity in 2016, and intends to receive the rest of the deduction in 2020? How will the “additional use” be calculated?

According to the current law, the maximum deduction amount is set as the amount of the property deduction in effect on the date of the initial application. That is, if someone first used a deduction of 1 million rubles in 2021, and purchased another property in 2020, then the buyer will have the right to additionally use the remaining 1 million rubles of the deduction. And not the increased amount that is valid at the time of the second purchase.

Obtaining a property tax deduction through an employer

If you contact your employer, you can receive a property tax deduction before the end of the tax period. In this case, filing a 3-NDFL declaration is not required.

What do you need:

• Write an application (in any form) to receive a notification from the tax authority about the right to a property deduction. You can use the form that the Federal Tax Service recommends in Letter dated October 6, 2016 N BS-4-11 / [email protected] But it is much easier to submit an application through the taxpayer’s personal account, since there is already a special form there.
• Make copies of documents confirming your right to receive a deduction. Upload them to the taxpayer’s personal account and sign with an electronic signature (there is no need to specially obtain it, it is generated automatically).
• Submit to the tax authority an application to receive notification of the right to a property deduction, attaching copies of documents confirming this right.
• After 30 days, receive a notice of the right to deduction from the tax authority and give it to your employer.
• Provide a notice issued by the tax authority to the employer, which will be the basis for not withholding personal income tax from the amount of income paid to an individual until the end of the year.

A notification from the Federal Tax Service is the basis not to withhold personal income tax from the salary paid to an employee in the current tax period, and the main document confirming the right to deduction, therefore, upon receiving the notification, you must check whether all your data and details are correct.
Yulia Rybalko Leading payroll specialist in legal

note

• There is no statute of limitations for obtaining a property tax deduction. For example, you can receive a tax deduction even 10 years after purchasing an apartment.
• If you file a deduction yourself, then at the tax office, after the end of the tax period, you can count on a one-time full amount of 13% of your income earned during the year. If the deduction is issued through the employer, then the personal income tax refund will occur before the end of the tax period if the tax office confirms the right to the deduction. This will allow you to receive your salary without personal income tax withholding, starting from the month in which you received the notice from the tax office.
• According to paragraph 9 of Art. 220 of the Tax Code of the Russian Federation, if property tax deductions cannot be used in full during a tax period, their balance can be transferred to subsequent tax periods until they are fully used. Depending on the taxpayer’s earnings, personal income tax refunds may take several years.

Is there a property deduction for the completion or renovation of residential premises?

On this issue, as well as a number of previous ones, the Federal Tax Service until recently took a tough position. It was believed that the costs of repairing and completing a home should be included in the general tax return, which is prepared together with an application for a property deduction for the purchase of an object.

Previously, when a person bought an apartment in the format “with construction finishing”, and then applied to the tax office for a personal income tax refund, these payments were made to him for the purchase of housing. Often it was not possible to start repairs right away; this work was postponed until the next year. But when the taxpayer tried to include these expenses in the deduction, he was refused.

Then came the decision of the Supreme Court: “Receipt of a property tax deduction over several tax periods will not be considered repeated if the deduction is provided in connection with the completion (finishing) of a property that was not completed (received without finishing) at the time of acquisition.”

This resolution is now used by our citizens, slowly, finishing a house or decorating an apartment. These expenses, even spread over several years, also become subject to tax deductions.

In 2021, it will be possible to receive a tax deduction without a declaration

Already in the spring of 2021, the process of obtaining a deduction can be automated and therefore simplified. On January 26, the State Duma adopted in the first reading a bill on providing personal income tax deductions online.

The Federal Tax Service promises that in order to return personal income tax, it will be enough to simply fill out an electronic application generated in your personal account on the Federal Tax Service website. You won’t have to worry about filing declarations and certificates. And tax authorities will be able to receive information about the right to deduction without the participation of taxpayers. For example, if the purchase of an apartment is carried out with the participation of a bank, then the information necessary for a tax deduction will be received by the tax authority from the bank.

The law will make life easier for many.
The pandemic has shown us how important it is to develop digital technologies, to make access to government services remote, so that people can use them in any situation. Vyacheslav Volodin Chairman of the State Duma

Earlier, the press service of the Federal Tax Service explained to Rossiyskaya Gazeta that the improved procedure will reduce the time required to receive deductions - from 3 to 1.5 months.

When selling

Not only citizens purchasing real estate have the right to obtain a tax deduction. This opportunity is also available to those who sell it. In accordance with current legislation, a citizen, after selling real estate, must pay 13% tax on the profit received.

If you use the right to a tax deduction, you can significantly reduce your expenses. Often, the original cost of the real estate item at which the seller purchased it is subtracted from the total amount received after a purchase and sale transaction. In some cases, it is possible to reduce the amount from which income tax will be deducted by 1 million rubles. Often this method of calculation is used when the original cost of the property was less than the specified amount.

For example, if the current owner purchased an apartment for 700 thousand rubles and sold it for 1.2 million rubles, then it will be much more profitable for him to use the second calculation option. Then 1 million rubles of tax deduction is subtracted from the current value. As a result, instead of personal income tax on 500 thousand rubles, the seller will pay only on 200 thousand rubles. The final amount of income tax will be 26 thousand rubles.

Previously, citizens who owned real estate for more than 3 years could use the right of deduction. However, recent changes in the current legislation have introduced a number of amendments that have tightened the rules for using the deduction for real estate sellers:

• starting from 2021, the property tenure period has been increased from 3 to 5 years;
• The procedure for calculating the value of property being sold has been changed.

Attention! According to the new rules, when calculating the tax base, it is not the market price that is taken into account, but the cadastral value of the apartment.

Tax deduction is an excellent opportunity for working citizens to reduce their expenses when buying and selling real estate. The main thing is to make the correct calculations and collect the necessary documents.

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