Property deduction when refinancing - how to receive and return interest?

Copywriter June 9, 2020 477 Write a comment

The tax deduction when refinancing a mortgage is retained - this is one of the important parameters for re-issuing a home loan with another bank. A partial refund allows you to reduce the total cost of housing and it is likely that when planning your loan you were counting on a tax deduction. Therefore, it is important to know how to reissue a loan so that the deduction is preserved.

For example, a few years after you took out a loan from a bank and purchased real estate, you discover that bank lending conditions have changed greatly. Now you could take out a loan on more favorable terms than those that were offered to you before, so the decision to close the current loan and take out a new one at a lower interest rate is quite natural. Moreover, the mortgage calculator clearly shows how much money you can save on subsequent payments.

After performing simple calculations, the question of whether refinancing a mortgage is profitable is no longer worth it - however, what about the tax deduction?

Maximum amount on hand and reimbursement period

There is a limit on the maximum value of residential real estate from which a tax deduction can be paid - this is 2 million rubles. Accordingly, 13% of this maximum amount will be 260 thousand rubles, and the state will not return anything else, even if you paid for housing not 2 million rubles, but 10 - 15 million rubles.

The period for paying the amount due directly depends on the citizen’s income, meaning confirmed income on which tax was paid (personal income tax - personal income tax)

.
The property deduction is calculated from the amount of taxes that were paid to the treasury during the calendar year. Let's give an example: with an annual salary of 1 million rubles, personal income tax is 130 thousand rubles (13%)
. Accordingly, for this year the citizen is entitled to compensation not exceeding this amount - the state will not be able to give more than the taxes paid.

The rest (up to the maximum)

the owner of the property can receive it for the next year, if, of course, taxes were paid that year.
However, if taxes were not paid in the next year (due to lack of work or due to a change in the format of employment)
, a declaration can be submitted for the next year and received a refund.

Tax deduction for bank mortgage interest

You can receive a deduction not only for the amount paid when purchasing a home, but also for the interest that borrowers pay for using the loan provided. The maximum amount for the borrower in this case is 390 thousand rubles, however, during the year the state will not return more than 13% of the interest paid for the past calendar year. That is, if for a year the bank accrued (and the borrower paid) interest, for example, 400 thousand rubles, then the borrower can count on a return of 52 thousand rubles for this year.

Regarding the base amount of interest charges on which the tax deduction is calculated, the maximum cost of housing cannot be higher than 3 million rubles. Until 2014, this amount was equal to 5 million rubles. This deduction is not tied to the time of ownership of an apartment in a high-rise building under construction (or to a private house, if the loan was issued for self-construction of housing), but to the moment of concluding a mortgage agreement.

In addition, the interest return can only be received once in a lifetime and only on one property. So, if it was not possible to get the maximum possible amount of interest (390 thousand rubles), then it will no longer be possible to get the balance after taking out a loan for another apartment.

Nuances of filing a tax deduction

By purchasing a home with a mortgage, each person can return a certain amount of money. To do this, you will need to submit all documentation for the 1st and 2nd loan to the tax office:

deposits for an apartment;
mortgage and refinancing agreements;
assessment of living space;
document from the workplace, etc.

You can find out the full list of documents by submitting a request to the Federal Tax Service at your place of registration. Based on the rules, the tax office will carry out the audit within 3 months, and will allocate another month to credit funds to the personal account of the taxpayer who claims tax payments. Therefore, the main advice: be patient.

Complete turnkey apartment renovation

Everything is included The cost of repairs includes everything: work, materials, documents.
Without your participation After agreeing on the project, we only bother the owners when the repairs are completed.
The price is known in advance. The cost of repairs is fixed in the contract.
Fixed repair period Turnkey apartment renovation in 3.5 months. The term is fixed in the contract.

Income tax refund for each spouse

Everything that was said earlier regarding the rule for the maximum deduction amount “on one hand” continues to apply in the case of the acquisition of real estate by a married couple. That is, compensation payments in equal amounts are due to both husband and wife, thus, the family can collectively claim a double tax refund. This only applies to real estate that has been purchased (and registered)

after 2014, different rules apply to housing that was purchased earlier
(more on this below)
.

Spouses will receive a tax deduction only if both husband and wife are officially employed (the employer pays taxes for them) or one of them has other income on which personal income tax is paid on a tax return. Actually, the scheme described above is applied here - how much taxes go to the treasury, the state returns so much.

In addition, the payment amount included in the purchase and sale agreement must be actually paid, that is, supporting documents must be available. In this case, it does not matter to whom the property is registered, since, according to the Family Code of the Russian Federation, if the property was acquired while the spouses were married, it is considered joint property.

Personal income tax refund when refinancing

When refinancing a mortgage loan, the borrower may be eligible for a tax deduction, but this fact depends on some nuances. First, the refinancing agreement must mention the first mortgage loan. This will confirm that it is the housing loan that is being refinanced, and not the borrower’s third-party debt to the financial institution. Secondly, if the loan is issued to refinance debt under a previous loan agreement, without indicating the entire chain of transactions, the right to a refund of overpaid tax is lost.

Thus, you need to pay attention to one important factor: you can receive a tax deduction only for a targeted loan for the purchase or construction of residential property and this must be specified in the refinancing agreement . In the absence of such an explanation, references to the first mortgage agreement, characteristics of the purchased property, which is likely during refinancing, the basis for payment is lost. Let us turn to the provisions of the Tax Code of the Russian Federation with the latest amendments in force for 2020 (Article No. 220 of the Tax Code of the Russian Federation, clause 1, clause 4).

Property tax deduction in the amount of expenses actually incurred by the taxpayer to repay interest on targeted loans (credits) actually spent on new construction..., as well as to repay interest on loans received from banks for the purpose of refinancing (on-lending) loans for new construction or acquisition of territory of the Russian Federation of a residential building, apartment, room or share(s) in them...

It is worth emphasizing here - the right to deduction under this item is secured, but only from interest paid to the bank. The base established for 2020 for calculating the tax deduction from them is 3 million rubles. The return from the base of 2 million rubles for payments made to the purchase is regulated by clause 3 of the same article and assumes the receipt of overpaid tax on “actually incurred expenses for the construction or acquisition of real estate.” In accordance with the provisions of the Tax Code of the Russian Federation, refinancing a loan is not a basis for refusing to accrue a tax deduction.

Also, the legislation does not limit the number of on-lending for one housing loan. This means that the mortgage can be refinanced several times and after each signing of a new agreement, you can receive a deduction from interest if the document indicates that the loan was taken to refinance a targeted housing loan. This is a must.

Important! The borrower has the right to return the funds to his account or reduce the monthly tax deduction from wages. That is, income tax will not be transferred to the budget. This applies to all expenses on mortgage loans incurred since 2020.

The date of registration of the mortgage loan deserves special attention due to changes in legislative provisions in 2014. If the borrower used his right to a personal income tax refund before 2014, the funds can be returned only from one object. In the event that the return was not issued, then, in accordance with the amendments, the number of objects does not matter.

Rule changes in 2014

Property deductions for housing that were purchased before January 1, 2014 were issued with reference to the property, and not to the owner-taxpayer. That is, the maximum value of real estate, which serves as a base, was 2 million rubles, regardless of the number of owners and other conditions.

In addition, there was a rule according to which it was possible to take a tax deduction when purchasing a home only once in a lifetime, regardless of how much less the cost of the home was than the established maximum of 2 million rubles. That is, if a citizen bought an apartment for 1 million rubles, he was owed a deduction in the amount of 130 thousand rubles (13% of the cost of housing) and his right was considered fully realized to apply for more deductions, in case of purchasing another apartment he could not.

For housing that was registered in 2014 or later, the property deduction is calculated according to different rules. As already noted, each homeowner can receive 13% of the amount, not exceeding 2 million rubles (according to their share of the payment). So, if an apartment, for example, costs 6 million rubles and belongs to three owners in equal shares, then each of them can receive a deduction in the amount of 260 thousand rubles.

Further, the rule changed according to which it was impossible to apply for a property deduction again. Now the taxpayer’s right will be exercised in full (up to 2 million rubles) regardless of how many real estate properties he purchases. So, if a citizen buys one apartment for 1 million rubles, he is paid compensation in the amount of 130 thousand rubles, and if then, after a few years, he buys another apartment for 1 million rubles, he is also paid 130 thousand rubles. But if he decides to purchase a third apartment, he is no longer entitled to receive a deduction, since he has already exhausted his limit. The same applies to owners who have shares in purchased apartments.

Property deduction - what is it?

The Tax Code of the Russian Federation determines that any citizen who pays taxes has the right to receive a tax deduction for expenses associated with the purchase of residential real estate. However, during the construction of a residential building, this right also remains with the citizen.

Moreover, in addition to the return of part of the cost of the property, the owner has the right to a refund of part of the interest if this same property was purchased with a mortgage. All these rights of a citizen of the Russian Federation are spelled out in Article 220 of the Tax Code.

But there is a small caveat . The size of the tax deduction has limitations - it is paid only from two million of the cost of the purchased apartment. In this case, you can exercise the right to a tax deduction at any time after receiving a certificate of ownership.

What is refinancing and why is it needed?

So, what can a borrower face when refinancing a mortgage loan? Refinancing is the transfer of the borrower's debt obligations to the bank that issued the mortgage loan to another bank. The new bank pays off the borrower's debt to the first bank, and the borrower now owes money to that lending institution.

The attractiveness of this operation lies in the fact that by moving to another bank, the borrower receives more favorable conditions - a lower interest rate on the loan, a longer loan term. Actually, in this way banks simply lure clients away from each other.

But why do the banks themselves need this? Credit institutions are forced to develop their products based on the key interest rate set by the Central Bank. The rate changes periodically, depending on economic conditions in the country, so mortgage interest rates “jump” and loan rates become higher or lower.

However, under the terms of the agreement, the bank is not at all obligated to reduce its mortgage rate for a client who previously took out a loan at a higher rate. Therefore, the borrower resorts to refinancing and goes to another bank, where the mortgage rate currently corresponds to the market average.

How are things going with the deduction after refinancing?

What does the Tax Code of the Russian Federation say about receiving a tax deduction when refinancing? After the debt is transferred to another bank, the opportunity to receive a tax deduction remains. Moreover, there are no restrictions on the number of such transitions; during the entire loan term, the borrower can change the bank (and, accordingly, the loan terms) as many times as he sees fit.

In any case, the borrower, after refinancing his loan, will receive compensation in full, that is, in the amount and on the conditions that are prescribed in the Tax Code of the Russian Federation for any mortgagee.

Can I get a tax refund on my mortgage?

According to paragraph 1.4 of Article 220 of the Tax Code, it is possible to obtain a property tax deduction from the actual amount of expenses for repaying a refinanced loan for the purchase of real estate.

Sometimes the procedure is carried out in the same bank as part of a loyalty program designed for regular customers, but more often than not, competitors of the financial institution offer favorable conditions. When moving to another bank, it is important to ensure the legality of its activities, which are controlled by the Central Bank.

We talked about the general conditions for obtaining a tax deduction when buying an apartment with a mortgage and the procedure for returning it in this article.

At the bank where the apartment was purchased

If the refinancing was carried out without changing the financial organization, all the necessary documentation can be obtained in one place. In this case, it will be easier to confirm your right to compensation.

Attention! The deduction can be issued for only one property.

Is this right preserved in another bank?

When moving to another bank, the right to receive a deduction remains. But before applying for a new agreement, you need to wait until payments under the original loan agreement are completed. To contact the tax office, you will need to take payment certificates from both banks.

What is needed for registration with the tax office?

When concluding a mortgage loan refinancing agreement, you need to make sure that the document explicitly states that it is the mortgage loan that is being refinanced, and not a loan of a different format. In addition, it is necessary that the address appear in the contract (if, of course, the house has already been built and the object has been assigned an official address).

When contacting the tax office to apply for a deduction, you must, in addition to the standard set for such cases, provide the following documents:

Loan agreement (initial), to which a payment schedule is attached;
A certificate from the bank (first) stating that all obligations of the parties under the loan have been properly fulfilled, and the debt along with interest has been repaid;
Refinancing agreement, which must also be accompanied by a payment schedule;
A certificate from the bank that carries out the refinancing, which indicates the details of the original agreement (may not be needed if these details are specified in the refinancing agreement itself).

A prerequisite for receiving a tax deduction after refinancing is to indicate in the new agreement the purpose of the loan - refinancing only. Violation of this clause may become an insurmountable circumstance that will not allow you to receive a property deduction.

How to issue a return

To receive a personal income tax refund when refinancing a mortgage to a personal bank account, a person must independently contact the inspectorate. The option of using a citizen’s electronic account is also allowed. In any case, a number of documents will be required, without which the application will not be considered:

tax returns with information;
copies of all completed passport pages;
certificates of income from places of work for the tax period;
a statement of desire to use the deduction, which will indicate the bank details for receiving the money;
a copy of the housing purchase or equity participation agreement;
documents confirming timely payment of the loan;
copied extract from the Unified State Register of Real Estate;
a copy of the deed by which the housing was transferred to the owner;
all mortgage lending agreements with banks, to which payment schedules are attached, are binding and cannot be lost under any circumstances;
certificate of full repayment of obligations from the original creditor;
paper from the institution that refinances the loan will be required if this is not specified in the agreement;
information about accrued interest amounts.

To receive a deduction, you must contact the inspectorate with all the documents required for the procedure.

Having collected this package of papers, you should wait, since tax specialists will check it within three months. After making a decision, you should wait about a month until the property deduction provided for refinancing a mortgage is credited to your bank account. It is quite possible when filling out the application to indicate that compensation must be received through the employer.

Important! As a result, the client is given confirmation of this right, which he takes to the accounting department and receives wages without tax withholding.

If the entire deduction has not been returned by the end of the calendar year, you will have to receive confirmation again, and after that the tax will continue to be returned. Before the entire refund is transferred, a person cannot lose payments. In addition, loss of the right to deduction is impossible if the client has had income in recent years and applies with a full package of papers.

How to get a tax deduction if the bank goes bankrupt (changes owner)

In this case, the transition to a new bank does not depend in any way on the desire of the borrower, since the procedure involves the sale of the assets of the credit institution (including mortgage debts) at an auction. The buyers are other banks that acquire claims on loans; accordingly, the borrower now has debt obligations to another credit institution.

In addition, the bank may find a new owner and, as a result, find itself reformatted or even disbanded. When applying to the tax office for a deduction, the mortgagee must submit the following documents:

Mortgage loan agreement;
Agreement on the assignment of rights of claim (has the form of a notification that the new lender automatically sends to the mortgager by mail);
Payment schedule for the new bank.

Actually, according to the law, the terms of the loan remain the same, so the agreement with the bank that issued the loan will not lose its force.