Of all banking credit products, mortgages are the most onerous and time-consuming. But sometimes it is precisely such a loan that allows citizens to realize their dream of purchasing their own home. In this article we will tell you how to return interest on a mortgage aimed at purchasing real estate using a tax deduction.
According to Russian legislation, a citizen can return part of the funds paid for taxes or reduce the tax itself when buying a home on credit. This deduction option is called property deduction and was created for the purpose of social assistance to citizens who purchase housing with their own money.
How to get your mortgage interest back
What is a tax deduction
The legislation of the Russian Federation offers preferential conditions for the purchase of real estate - an apartment, house, room, land plot, as well as shares of this property.
The essence of the benefit is that after purchasing and completing the transaction, you have the right to a partial refund of the money spent.
In order to get a tax refund for a mortgage, you must contact the tax authorities and declare your right to receive a tax deduction: fill out a 3-NDFL declaration and attach the accompanying documents.
What does the property tax deduction consist of?
Every month your employer contributes 13% of your salary to the budget - income tax. If we switch to the language of tax legislation, your salary is a taxable base, which can be reduced by the amount of the tax deduction. Due to this, the amount of monthly contributions to the budget is also reduced.
After applying the deduction, you, as a taxpayer, will have a surplus on the personal income tax paid during the year. You can choose one of the forms of reimbursement - receive the excess into your account or exercise the right not to pay payroll tax until the entire refund amount has been exhausted.
Today, the tax deduction for the purchase of an apartment and other real estate is 2 million rubles .
This means that you can return 260 thousand rubles (13% x 2 million) from the taxes that you have already paid to the budget.
If your annual salary is less than 2 million rubles, the property tax deduction can be spread over several years.
It is important to understand that the amount of your refund cannot be greater than the tax you paid for the same period. And the total tax deduction cannot exceed the cost of the purchased housing.
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Example:
During 2021, your salary amounted to 1.5 million rubles. During this period, you (your employer) paid 195 thousand rubles to the budget. (13% x 1.5 million). In 2021, you bought a room for 500 thousand rubles. This means that in 2021 you have the right to file a 3-NDFL declaration and apply for a deduction for the entire cost of the purchased housing.
The calculation looks like this:
from 1.5 million rubles (your salary or, in other words, the tax base) 500 thousand rubles are deducted. (the cost of the room you bought - and as we remember, the deduction is up to 2 million rubles, but not more than the purchase amount). As a result, the tax base decreases and becomes equal to 1 million rubles. (1.5 million – 500 thousand).
This means that it was on this amount that you had to pay tax in 2020: 13% x 1 million rubles. = 130 thousand rubles. But since the declaration is drawn up next year after receiving ownership rights (in 2021), then in fact in 2021 you have already paid 195 thousand rubles in taxes. The difference should be credited back to your account. In total, for purchasing a room you will receive a refund of 195 – 130 = 65 thousand rubles.
We told above that tax legislation allows you to return up to 13% of 2 million rubles, that is, 260 thousand. But your return in the example above was 65 thousand. How to be? Is the remaining money going to waste? Fortunately, no!
For housing purchased after 01/01/2014, there is the right to transfer the balance of the tax deduction to the housing that you buy in the future.
In order to qualify for a property tax deduction, you must have ownership documents. When purchasing housing under a shared participation agreement, this is the Transfer and Acceptance Certificate. For housing purchased under a purchase and sale agreement, an extract from the Unified State Register is required.
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Terms of consideration
Through the Federal Tax Service
The tax office has 90 calendar days to verify documents. One more month to transfer the money.
Through the employer
The accounting department is required to make a refund upon receipt of the notice from the beginning of the year and stop withholding income taxes until the end of the year. If the amount of the deduction did not cover the amount of two hundred sixty thousand plus the amount of interest on the mortgage loan, you must apply again for a new notification next year.
What is the main tax deduction for a mortgage?
Mortgage lending in Russia is becoming increasingly popular. And this is justified. Real estate is not getting cheaper, and it can be difficult to save up the entire amount to buy the apartment you like. Using borrowed funds is a convenient way not to postpone the purchase for many years, but to become the owner of your own home right now.
We would like to please you - if you have decided to take such a responsible step as buying an apartment on credit, tax legislation has provided preferential conditions for this option: a tax refund on mortgage interest.
Tax deductions when buying a home with a mortgage are:
- on the purchase price (basic);
- on interest paid.
The main deduction includes funds spent on the purchase of an apartment, house, land and other residential real estate. At the same time, it includes both personal savings and credit savings.
Above, we talked about the basic principle of calculating the property tax deduction - it is the same for purchasing housing with your own money and for purchasing with a mortgage. More detailed information is presented in the article “Tax deduction when purchasing an apartment, house, plot of land.”
To summarize:
- You must have an official place of work, a “white” salary and monthly contributions to the budget of 13% personal income tax. Or you have other sources of income from which you pay personal income tax. This could be, for example, income from rental housing.
- The maximum amount of tax deduction that you can receive when purchasing an apartment, house, land plot and other real estate is 2 million rubles. 260 thousand rubles are returned to your account. – 13% of the deduction amount.
- Claiming a tax deduction is allowed only after receiving a document of ownership. As mentioned above, for shared construction this is an Acceptance and Transfer Certificate, and for housing purchased under a purchase and sale agreement, this is an extract from the Unified State Register of Real Estate.
- You can contact the Federal Tax Service with documents for a personal income tax refund the next year after receiving the right to deduct.
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What documents are needed?
To apply for a tax deduction you will need:
- identification document;
- declaration 3-NDFL and application for tax refund;
- documents confirming your expenses;
- documents confirming the paid income tax (certificate 2-NDFL).
You can find a detailed list of documents here: Documents for property tax deduction.
What is the mortgage interest deduction?
When purchasing an apartment with a mortgage, you have the right to a tax deduction on the interest paid to the bank. All actual repaid interest is taken into account, but not more than 3 million rubles . Of this amount, 13% is returned to your account, that is, 390 thousand rubles. (13% x 3 million rubles).
These terms came into force on 01/01/2014.
Before January 1, 2014, the tax refund on the loan had no upper limit. What does this mean for the taxpayer? If your home was purchased before 2014, and you have not previously exercised your right to return personal income tax on your mortgage, you can receive a deduction in the full amount of the interest actually paid.
Example:
In 2011, you took out a mortgage loan in the amount of 14 million rubles. and bought an apartment for 17 million. From 2011 to 2021. paid the bank 5 million rubles. percent. The transaction was officially completed before January 1, 2014, so you have the right to claim a deduction equal to the amount of interest actually paid. As a result, 650 thousand rubles will be credited to your account. (13% x 5 million rubles).
Important point! If the cost of the apartment under the contract is lower than the amount of funds taken on the mortgage, then the tax refund will be calculated based on the actual cost of the apartment.
Example:
In 2013, you took out a mortgage for 17 million rubles. and paid the bank 6 million rubles. percent. At the same time, you bought the apartment for 13 million rubles, which is noted in the purchase and sale agreement.
The transaction was officially completed before January 1, 2014, so you have the right to claim a tax refund on the loan equal to the amount of interest paid. But since the deduction is provided specifically for the purchase of an apartment, it will include interest on 13 million, and not on 17 million rubles, that is, on the amount actually spent on purchasing the apartment.
The interest that will be deducted is calculated in proportion to the amount under the mortgage agreement and the actual purchase amount specified in the agreement.
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List of documents for deduction for treatment/purchase of medicines
Treatment in a medical institution (hospital, clinic, ambulance station, paid medical center):
- Agreement with a medical institution - original and copy. The contract must indicate the cost of services.
- A certificate confirming payment under the contract (must contain the patient’s medical card number and TIN, as well as the treatment category code: “1” - ordinary, “2” - expensive).
- A copy of the license of the medical institution.
Purchase of medicines:
- Original prescription in form 107-1/у with the stamp “For tax authorities.
- Checks, receipts, payment orders (to confirm payment)
- A certificate confirming the absence of an expensive drug in a medical institution (prepared in case the patient independently pays for expensive drugs prescribed by a doctor).
Conclusion of a voluntary health insurance agreement:
- Copy of the voluntary insurance agreement
- Copy of insurance company license
- Receipt or check for payment of insurance premium
When does the right to a tax deduction on mortgage interest arise?
The interest deduction, like the main one, can be claimed only in the year following the year of registration of ownership of the housing. If you received an Acceptance and Transfer Certificate (or an extract from the Unified State Register of Real Estate) in 2021, you can submit a 3-NDFL declaration no earlier than 2021.
It often happens that a mortgage agreement is concluded before receiving documents for an apartment. This does not affect the amount of the tax deduction for mortgage interest - the entire amount of interest you paid from the very first payment is included in the deduction.
Example:
In 2021, you took out a mortgage for shared construction of a house. Payment of principal and interest began from the first month of the mortgage agreement. You received the transfer and acceptance certificate from the developer in 2021, which means that your right to receive a tax refund begins in 2021. All interest starting from 2016 will be included in the calculation.
It must be remembered that only interest actually paid for past periods is included in the deduction. If your annual salary and the amount of taxes transferred are sufficient, you can immediately receive the entire main deduction. But the mortgage interest deduction is made only based on the total of your payments to the bank - annually for the previous year.
We recommend that you first receive the main deduction, and only then claim the interest deduction. Then you can get money in just a few years.
Example:
In August 2021, you took out a mortgage and bought an apartment for 3 million rubles. How your 3-NDFL declarations will be generated:
- 2018 – if your income is sufficient, you have the right to claim a full deduction for the principal amount – 2 million rubles. and receive 260 thousand rubles to your account at a time. In addition, you indicate the mortgage interest you paid from August to December 2017.
- 2019 – indicates the interest paid to the bank during 2018.
- 2020 – indicates the interest paid to the bank during 2019 and so on until the entire amount is exhausted.
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If the tax refund is made again
If the amount of deductions for the first time did not exceed 260 thousand rubles, then when buying housing for the second time, you can apply for a tax deduction for the balance that was not received. This does not happen when applying for a mortgage and you are not allowed to receive a tax deduction twice.
The deduction can be issued both through the employer and through the Federal Tax Service, but it is more convenient to immediately contact the tax office with a set of documents and file a declaration there to avoid mistakes. When submitting documents, it is advisable to have two copies. One is given, and on the other the tax representative marks acceptance. This will exclude all claims in case of loss of any document.
Types of loans and credits that can be included in the interest tax deduction
According to paragraph 4 of paragraph 1 of Article 220 of the Tax Code of the Russian Federation, interest can be returned on any borrowed funds that were allocated for the acquisition or construction of real estate.
This means that the loan issued to you at work to purchase an apartment is included in the tax deduction for interest paid.
An important condition is that the contract must specify the purpose of the loan: purchase/construction of a specific apartment, house, etc. Otherwise, you will be denied a refund on interest (Letter of the Ministry of Finance dated 04/08/2016 No. 03-04-05/20053).
Example:
You took 3 million rubles. consumer loan and bought an apartment with it. You have the right to receive a tax deduction of 2 million rubles. and return 260 thousand rubles to your account. But you cannot claim a deduction for credit interest, since the loan was not issued as a target loan.
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What is the essence of the mortgage deduction?
The law on the return of part of the amount through a tax deduction is regulated by Chapter 23 of the Tax Code of the Russian Federation (hereinafter referred to as the Tax Code of the Russian Federation), and various legal acts that correct the registration procedure.
According to the law, every citizen who has official income, which is taxed at a rate of 13% and pays monthly taxes on this income, has the right to social compensation in the form of a 13% refund. It should be understood that part of the amount paid for the loan is returned not by the bank itself, but by the state.
This deduction is called property, is regulated by Article 220 of the Tax Code of the Russian Federation and applies to acquired real estate. It does not matter whether the purchase of a house/apartment was paid for by the citizen immediately from his own funds or issued through a bank targeted loan.
Rules for obtaining mortgage interest deductions
Major changes to the rules occurred on January 1, 2014:
For real estate purchased under a mortgage agreement before 01/01/2014 , there is no limit on the amount of interest deduction. This means that in the 3-NDFL declaration you have the right to indicate all the interest actually paid to the bank and return 13% of this amount to the account.
Example:
In 2010, you took out a mortgage of 10 million rubles. and bought an apartment. From 2010 to 2021 you gave the bank 4 million rubles. percent. You have the right to receive 13% x 4 million rubles into your account. = 520 thousand rubles.
For real estate purchased after 01/01/2014 , there is a restriction. The tax deduction for mortgage interest cannot exceed 3 million rubles.
This means that no matter how much interest you pay to the bank, you can receive no more than 390 thousand rubles into your account. – 13% of 3 million rubles. Even if your interest has exceeded the 3 million mark.
Example:
In 2021, you took out a mortgage of 10 million rubles. and bought an apartment. From 2016 to 2021 you gave the bank 4 million rubles. percent. Despite this, you will receive 13% x 3 million rubles on your account. = 390 thousand rubles.
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How many times can you get a deduction?
Tax legislation provides for the right to receive a property deduction or income tax refund within the following limits if a citizen has purchased an apartment:
- before 2014 and took advantage of the return, then he cannot declare more in relation to another apartment (regardless of the cost of acquisition);
- since 2014, the maximum return is 260,000 rubles to each owner and the number of objects is not limited. Those. the deduction can be applied to several residential properties, but not more than 2,000,000 rubles in total.
Conditions for obtaining a mortgage interest deduction:
1) Purpose of the loan . The agreement between you and the organization that provides you with a loan must indicate that the money is given for the purchase or construction of specific housing. You will not be able to get a tax deduction on interest on a consumer loan.
2) Refund for interest actually paid . Only mortgage interest that has already been paid in previous periods can be included in the 3-NDFL declaration. Planned but not repaid interest payments are not included in the calculation.
3) The right to deduction arises in the year following the year of acquisition of ownership. If you bought an apartment in 2019, and the documents for it were drawn up in 2021, then you can contact the inspectorate no earlier than 2021.
4) The right to a tax refund on mortgage interest paid before obtaining title . The interest that you started paying before receiving the title deed does not disappear and is taken into account in your tax refund. Let's say you took out a mortgage and bought an apartment in 2021, and issued an extract from the Unified State Register in 2020. In 2021, you pay all the interest for 2021 and 2020 to 3-NDFL.
5) Unified declaration 3-NDFL for the main and interest deduction on the mortgage . If you plan to claim both deductions in one year, you do not need to prepare two declarations - all data is entered into a common form. This also applies to the case when the principal amount has already been received - its amount must be indicated in the declaration as a separate line.
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Where and when to submit?
Documents for return must be submitted to the inspectorate at the place of registration of the applicant, regardless of the location of the purchased housing. You can apply at any time, but it is more convenient at the end of the calendar year in which the certificate of registration of rights was received. The tax deduction is accrued for the three previous years (if the certificate is received on December 31, 2021, then the deduction is received for 2021, 2021 and 2015).
You can apply for a deduction even 10 years after becoming eligible. But f. 2-NDFL is accepted only for the last three years.
A mortgage usually lasts longer. Therefore, filing an application for interest compensation should not be delayed for more than 3 years. It’s better to either file two deductions in one year, or different ones alternately. Then all amounts will be received in full.
Check out other materials on our website about tax refunds when purchasing an apartment with a mortgage. Find out how to get a tax deduction if you purchased a mortgaged apartment in a building under construction.
Documents for registration of mortgage deduction
In order to apply for a tax deduction for housing purchased on credit (mortgage or housing loan), you must submit the following documents to the Federal Tax Service at your place of residence:
1) Agreement with the organization that issued the loan . Such an organization could be a bank or a company where you work. Don’t forget - the text of the agreement must contain a mention of the purpose of the loan for the purchase or construction of certain real estate. Prepare a certified copy.
2) Certificate of interest paid for the year . You request a certificate from where you received the loan - from the bank or from the accounting department at your place of work. The original is provided.
3) Identity document . This may be a passport or another document replacing it. Prepare copies of the first page and registration. Although a copy of your passport is not included in the list of required documents, we recommend that you have it on hand.
4) Certificate 2-NDFL . This is a certificate of your income for the year. Issued by the accounting department of the organization where you work.
If in 2021 you apply for a personal income tax refund for 2020, then the certificate is required specifically for 2021. There is no need to carry a 2-NDFL certificate for the partial year 2021.
If during the year you were employed in several organizations, you need to collect certificates from all workplaces. The original is provided.
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5) Application for tax refund . The application of the established form indicates the details to which money from the budget will be transferred. The original is provided.
6) Equity agreement or purchase and sale agreement . Prepare a certified copy.
7) Documents for payment of the transaction . With receipts, payment orders or receipts you confirm the fact and amount of the purchase of housing. The inspection accepts certified copies.
Transfer and acceptance certificate , if you bought housing under an equity participation agreement. Certified copy.
9) Extract from the Unified State Register of Real Estate , if you purchased housing under a sales contract. Certified copy.
10) Tax return 3-NDFL . The original is provided.
Be prepared for the fact that a number of tax inspectorates require copies of payment documents for payment of the principal amount of the debt. These can be payment orders, statements, checks and more. In addition, the inspector may request copies of documents on payment of loan interest.
You are not required to submit them, so act at your own discretion - either prepare the requested documents, or point to the letter of the Federal Tax Service of the Russian Federation dated November 22, 2012 N ED-4-3 / [email protected] It says that in order to receive a deduction, it is enough to provide a bank certificate about interest paid.
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New 3-NDFL form for 2021
If an individual decides to return part of the costs of purchasing an apartment through a property deduction, then he should fill out the 3-NDFL declaration form that was in force for the current year of completion.
In 2021, a new declaration form was introduced by Order of the Federal Tax Service dated August 28, 2020 No. ED-7-11/ [email protected] , which contains new barcodes and updated pages.
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Procedure and deadlines for filing a declaration for 2021
Methods for filing 3-NDFL when purchasing an apartment:
- Print out a new declaration form and fill it out manually, then submit it to the Federal Tax Service in person, through a representative or by mail.
- Fill out the 3-NDFL form on the computer, print, sign and submit to the Federal Tax Service.
- Fill out 3-NDFL in the program, which can be downloaded for free on the tax service website, then print, sign and submit to the Federal Tax Service - step-by-step instructions for filling out 3-NDFL in the program Declaration 2020 for deduction when buying an apartment.
- Draw up a declaration in the taxpayer’s personal account on the tax office website and submit it electronically.
An individual has the right to independently choose the filing method that is more convenient; the Federal Tax Service has not established any restrictions.
The deadline for submitting a tax refund for 2020 when purchasing an apartment is in any month starting from the next year 2021 (within three years, for pensioners - within four years).
