Tax deduction when buying real estate: what is it and how to get it? (FAQ)
A great way to save on buying real estate in Russia is to get a property tax deduction, which allows you to return part of the taxes you paid back to your bank account. Any Russian has this right, although the deduction is limited by law. This article devoted to the intricacies of obtaining such return and the most various situations that arise in practice. Article will be issued as a series of questions and answers.
What property types are under deduction?
Tax deduction - deduction received by the taxpayer upon purchase (as well as self construction) and the sale of housing. Accordingly, there are two main types: tax deduction for the purchase of housing and tax deduction for the sale of housing. This collection of questions and answers will focus only on property tax deductions for home purchases.
What is a tax deduction when buying a home and
how does it work?
Tax deduction is refund of the income tax amount paid by the taxpayer (transferred by his employer) in case of acquisition of an apartment or construction of a residential building. Tax carries out a audit of the package provided by the taxpayer documents and after that reimburses the amount of excessively paid tax on taxpayer account.
Unlike other income tax deductions unused amount of property deduction can be transferred to the next year.
Typically, a deduction scheme is as follows:
- Taxpayer submits a declaration for the last year (in which the property was purchased)
- If desired, the taxpayer may also request to permit its employer don't withdraw tax in future periods
- In this case, the employer will immediately return the tax amount for the current year to him, and then monthly he simply does not withhold personal income tax (until the deduction amount is used completely)
- If the taxpayer does not file an application for a deduction from the employer, the next day he repeats the whole process in the tax authorities
It’s important to understand that deduction amount - this is not the money that you will be able to return from the budget. This is the amount on which you can reduce the tax base (your income) when calculating the amount of income tax paid. So the actual amount that will save money - this is the amount of the deduction multiplied by the tax rate (13%). If a maximum deduction of 2,000,000 rubles is declared, then in fact, only 260,000 rubles (2,000,000 * 0.13) will be returned). Moreover, in the year when you declare the deduction, the budget will not pay you more than the amount of personal income tax paid by you (your employer) during this year. The unused amount will be returned by you in subsequent years.
| Example |
| Your income (up to tax deduction) is 800 000 rubles per year. In the same year you bought an apartment for 1 800 000 rubles. The amount of tax to be refunded - 1,800,000 * 0.13 = 234,000 rubles (since the price of the apartment does not exceed 2,000,000 rubles, this restriction does not apply). But this year, your employer transferred only 800,000 to the budget for you * 0.13 = 104,000 rubles. Accordingly, the tax refund to you only 104 000 rubles, and the remaining amount (234 000 - 104 000 = 130 000 rubles) you will receive in subsequent years. |
What are the conditions (restrictions) for receiving a tax deduction when buying a home?
The following conditions are required to be met:
- The taxpayer during the period made the purchase of the residential premises (please note that the deduction is provided only for residential premises and land plots)
- During tax period, the taxpayer received official income and the taxpayer paid the personal income tax (property deduction provided only for payments of this tax)
- The deduction is not provided in that part of the value of the property that is paid the taxpayer is not independent, but by attracting various subsidies (employer funds, government subsidies, maternity capital etc.)
- Taxpayer did not exercise his right to receive a tax deduction earlier
Is it important for the tax deduction that the apartment / house / housing were purchased by the taxpayer at his own expense?
No, the origin of the funds does not matter if acquired housing for borrowed funds the deduction will still be provided (and immediately in the full amount). No deduction will be able to get if the purchase of housing is financed by another person (by state, employer, maternity capital funds)
What law governs the right to receive tax deduction when buying a home?
All key questions, associated with obtaining a tax deduction are regulated in Art. 220 of Russian Tax
Is it possible to get a tax deduction on a purchase second time housing?
Yes, the restriction on tax deduction is tied to the amount (2 000 000 rubles), so the deduction is possible get over an unlimited number of objects, the main one, so that their total the cost did not exceed the amount specified in the law. Please note that this the rule applies to real estate acquired after January 1, 2014 of the year.
Is it possible to apply a property tax deduction on home purchase at the same time as other tax deductions (e.g. social - for treatment, education, as well as professional).
Not only possible, but also necessary. The main thing to remember here is that the property tax deduction is the only deduction, which can be carried over to next year. Therefore, first apply social tax deductions (which are not carried over), and property deductions, in case of insufficiency income in the current period will be gradually received in the next period.
Is it possible to get a property deduction when buying offices or apartments?
No, it’s impossible, since property deduction is provided only for the purchase of residential real estate (paragraphs 3, clause 1 of article 220 of the Tax Code of the Russian Federation). Accordingly, when purchasing office, warehouse and other non-residential premises, property deduction is not provided.
Apartments, although suitable for permanent residence, have legal status of non-residential property . However, a deduction on them can be obtained. In its letter of November 8, 2010 N ШС-17-3 / 1580, the Tax Authority claims that property tax deduction for apartments can be obtained if they actually meet the criteria for a dwelling established in the resolution Of the Government of January 28, 2006 N 47. In practice, in 95% of cases, apartments for sale meet all these criteria (they are designed in accordance with SP 160.1325800.2014 “Buildings and complexes are multifunctional” and the requirements there are almost the same as for residential apartments) . This conclusion is also confirmed by judicial practice - for example, there is the decision #2-334\2012 of April 3, 2012 (Interdistrict court in the Novosibirsk Region).
Why do some countries, cities or companies achieve economic success, while others are in poverty? Why is economic growth so weak and income inequality constantly increasing? How can new technologies change the global economic landscape? On this site we look at the most important global trends from the perspective of an economist.
