Obtaining a tax deduction when purchasing an apartment with a mortgage

A mortgage is an opportunity to purchase an apartment and live in it, even if the family does not have an amount that can cover the full cost of housing. A mortgage allows you to pay off the cost of an apartment gradually, in small installments. And yet, even when distributed into parts, the amount that will need to be paid remains quite significant. Returning mortgage interest in 2021 allows you to reduce costs.

Choose a mortgage without a down payment

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.

Who is entitled to compensation?

According to the Tax Code of the Russian Federation, the following are entitled to fiscal property compensation:

• citizens who purchased or independently built housing on a plot of land using their own or borrowed funds;
• foreign citizens who stay on the territory of the Russian Federation for more than 183 days a year and pay personal income tax in the amount of 13%;
• Women on maternity leave can apply for a deduction immediately after leaving maternity leave if the property was purchased before maternity leave.

The right to compensation can be exercised at the local fiscal office or through the employer through whom income tax is paid.

Who is not entitled to such compensation?

1. Unemployed citizens of the country.
2. Pensioners who do not pay 13% tax from other sources of income.
3. Working people, but at the same time receiving unofficial salaries “in envelopes”.
4. People who carried out a purchase and sale transaction between relatives.
5. Entrepreneurs operating under a special simplified scheme.

As mentioned above, the Tax Code of the Russian Federation provides for several options for deductions, one of which is property. There are also social and professional ones. When applying for other types of deductions (for education, treatment), the only barrier will be the amount of tax paid.

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.

Refund of personal income tax on mortgage interest: determine the amount

The exact amount of compensation will be determined by specialists after approval of the application and verification of all documents. For each citizen it will be different depending on:

• housing costs;
• dates of the transaction;
• amount of interest paid.

When compensating for interest on a mortgage, the specialist calculates 13% from the total amount of interest already paid and makes a refund to the bank account

Example

Citizen N. took out a mortgage for a period of 20 years at 15% per annum, purchasing an apartment worth 1,900,000 rubles.

1.9 million * 15% = 285 thousand rubles (interest for the year)

285 thousand rubles * 13% = 37,050 rubles (this is the amount that will be returned in a year).

It is important to understand that when calculating the amount of compensation, experts take as a basis the total amount of taxes paid by the borrower. That is, in fact, if the amount of taxes was less than the deduction due, then this right will extend to subsequent years until the funds are fully used.

If a situation arises where it is necessary to return compensation for several years at once, the application procedure will be identical. If you first learned that you can get back part of the money spent on housing on credit, this does not mean that time is lost.

Here it is important to determine the fact of personal income tax deduction at the time of conclusion of the transaction. If you were officially employed and regularly paid income taxes, then you can write an application to the fiscal service for a refund for several years at once, but no more than for the previous 3 years

Where to contact?

To exercise the right to return a partial amount for the paid mortgage, you can choose one of three methods:

1. Visit the tax office in person at your place of registration.
2. Fill out the online form on the Russian Government Services Portal.
3. Submit an application through the multifunctional center.

You can find out the number and address of the fiscal service in your city through the public services portal. To do this, you need to enter your personal data: TIN and address. Keep in mind that you need to choose a branch not according to your actual place of residence, but according to your registration address.

The electronic application option is the most convenient and simplest. In order to use the service, you must register on the site and log into your personal account.

When registering, you must provide the taxpayer’s personal information (passport number and series, TIN, registration address, SNILS). The opportunity to submit an application together in the completed declaration form will be available only after the administration has verified the accuracy of the entered data.

The multifunctional center is not geographically tied to specific addresses and accepts applications from all citizens of the Russian Federation. To use the deduction service, you must contact the center with the appropriate package of documents and submit an application for a refund of mortgage funds.

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.

Sum

The deduction is provided in the amount of interest actually paid on the loan that was provided for the purchase of housing. At the same time, the maximum amount from which personal income tax can be returned is limited - 3 million rubles.

Case 1. Ivanov I.I. bought an apartment for 4 million rubles with a mortgage. During the period of repayment of the mortgage, he paid interest on it totaling 2.2 million rubles. Ivanov can receive a tax deduction on mortgage interest from this entire amount, i.e. 286,000 rubles (2 million * 13%).

Case 2. Ivanov I.I. purchased an apartment for 7 million rubles with a mortgage. The amount of interest paid on the loan amounted to 3.8 million rubles. Ivanov can return personal income tax only with 3 million rubles of mortgage interest (390,000 rubles).

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 need to be collected?

To minimize the waiting time for a refund application and quickly process the service, we suggest that you familiarize yourself with the package of documents required for a tax deduction:

• 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);
• certificate from the bank with the account number for crediting.

As can be seen from the list, any adult citizen of the Russian Federation who has official employment and regularly pays taxes to the state can claim partial compensation for the funds spent on the purchase of housing.

What is important here is not even official work, but the monthly payment of income tax in the amount of 13%. Therefore, if a “working” person regularly gives part of his income to the state and submits a declaration, he can count on fiscal compensation.

If the apartment is shared by both spouses, the tax office must provide the original and a copy of the Marriage Certificate.

If a citizen claims a tax deduction for several years at once, but cannot provide payment documents for the loan, the tax office is allowed to accept a bank statement for payment.

The amount of fiscal compensation is determined by tax officials after checking documents and confirming personal income tax payment. Once the application is approved, the money will be transferred to the taxpayer's account. By law, this may take up to 90 working days.

In addition to the standard list of documents, tax officials may require additional papers. Let’s say that during the term of the loan agreement, the bank was declared bankrupt and restructured. Thus, the mortgage agreement becomes the property of another Lender, which means it is necessary to provide information about the assignment of the agreement to another bank.

The client can choose the method of returning money through a bank account, through a cash register or to a card.

Return procedure: step-by-step instructions

So, in order to return your legal 13% paid to the state treasury in the form of income tax, you need to follow these steps.

Table 1. Step-by-step instructions for refund

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).

When to file a return and when will your income tax be refunded?

A declaration for income tax refund can be submitted to the Federal Tax Service throughout the year. In this case, there are no restrictions on the deadline for submitting it until April 30.

However, the sooner the declaration and related documents are completed and submitted, the faster you will receive money into your account.

The maximum period for receiving tax deductions for accrued interest on a mortgage loan is 4 months after submitting a complete package of documents to the Federal Tax Service: 3 months for conducting a desk audit and 1 month for transferring money.

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.

How much can you get back?

A return of 13 percent from the purchase of an apartment mortgage is a conditional concept; in fact, it is necessary to make the calculation in one of the following ways:

1. You can return mortgage costs, the amount of which does not exceed the listed personal income tax. A personal income tax certificate from all legal income is taken into account.
2. Before recalculating interest, you will need to subtract from the amount paid to the bank the amount of all subsidies or benefits that were issued to repay the mortgage. You cannot receive interest reimbursement for payments made from maternity capital.

In addition, the situation in which several people act as homeowners, or parents act as co-borrowers, is considered individually. In such cases, the refund amount can be distributed among all borrowers.

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.

Statute of limitations

The provision of tax deductions is not limited to 3 years or any other period. Established in Art. 78 of the Tax Code of the Russian Federation, the rule on a 3-year period for applying for a refund of paid taxes does not apply to property tax deductions of citizens.

Considering the issue of the statute of limitations for property tax deductions, the Supreme Court of the Russian Federation found that the Tax Code of the Russian Federation does not limit a taxpayer’s application for a personal income tax refund to 3 years or any other period (determination dated February 27, 2021 No. 5-KG18-308). The Russian Ministry of Finance adheres to a similar point of view (letter dated September 30, 2021 No. 03-04-05/74665).

Mortgage assistance

If you need help in obtaining a mortgage loan, filling out the application correctly and collecting documents the first time, we recommend contacting a mortgage broker from DomBudet.ru.

How a broker can help:

1. Borrowers will be able to obtain bank approval with any credit history and unofficial employment.
2. Buy an apartment, land plot, share or commercial real estate in Moscow, Moscow region, St. Petersburg or Leningrad region.
3. Get a lower mortgage interest rate through cooperation with banks. The discount will be about 0.5-1.5% per year of the interest rate.
4. Select a mortgage offer that meets the client’s requirements.
5. Collect documentation and reach a deal with the lender.
6. Order a real estate appraisal, help with an insurance policy.

The client will save a sufficient amount of time, since he will only need to come to the office once, but remote cooperation is also possible. During the transaction, the client will not waste time traveling to the bank and other organizations, such as Rosreestr, to register property rights.