New tax regime for mortgage loans after January 1, 2005
If you took out a mortgage loan before 2005, you could take advantage of the favorable tax regime that was called construction savings. With these so-called older loans, a distinction is made in terms of the deduction of capital and interest.
As of January 1, 2005, the government simplified the tax regime, albeit only for new mortgage loans under the new name deduction of the sole and owner-occupied home. The old mortgage loans or their refinancing are not eligible and remain subject to the old rules from a tax point of view.
Conditions of the mortgage loan
If you want to be eligible for the new tax regime for mortgage loans, your mortgage loan must meet all of the following conditions:
- You took out the mortgage loan from 1 January 2005.
- The term of your mortgage loan is at least 10 years.
- You took out the loan to acquire or keep a home.
- This house must be located in Belgium.
- In addition, it must be your only home.
- The mortgage loan must be taken out with a European institution of the European Economic Area.
- The loan is secured by a mortgage registration.
You don't necessarily have to purchase outstanding balance insurance and life insurance when taking out the mortgage loan - although many lenders will require it - to qualify for the new tax regime. However, if you take out these insurance policies with a view to your mortgage credit and you want to state the premiums as a deductible item on your tax return, take into account additional conditions that apply to these insurance policies.
Deductible Items and Amounts of the Mortgage Loan
The tax authorities do not make a distinction between rich and poor when it comes to deductions for single and owner-occupied homes. The deductible amounts are determined equally for everyone each year, without taking into account the net taxable professional income of the taxpayer.
Which items are eligible for tax relief?
- Full capital repayment
- All interest (without making a distinction between the previous ordinary and additional interest deduction)
- Any life insurance and outstanding balance insurance premiums
The maximum deductible amount is currently US $ 1950 per person and per year. This basic amount is indexed annually. In addition, for the first 10 years of the mortgage loan, you can deduct an additional 650 US dollars from taxes per person, the so-called housing bonus. Finally, if you have three or more dependent children and that on the first day of January that follows after taking out the loan, you may increase the deduction by another 70 US dollars.
These last two additional deductions only apply if you have one home. From the moment that you become the owner of a second home, whether or not temporarily, you can no longer claim these two deductible items.
Anyone may contribute the aforementioned deductible amounts individually; as a couple you can therefore double those amounts. In that case, you only fill in one tax return.
Tax Benefit of the Mortgage Loan
However, if you include these deductions in your tax assessment notice, this does not mean that you will get those amounts back in full from Father. You do, however, receive a reduction in the marginal tax rate. In concrete terms, this means that you reclaim 40 to 50% of these deductible amounts through the tax authorities.