Many people finance a renovation of their house with a loan . There are different loan forms for this, but not every loan form is equally attractive. For example, the conditions and interest rates differ per loan type. Also, not every loan for a renovation of your house is deductible. In this article you can read which types of loans are tax deductible.
Home construction interest deductible?
You close a (re) construction depot as part of your mortgage or on top of your existing mortgage. The deposit contains money from which you or the bank pay the costs for the renovation. You receive interest on the money that you have not yet used. But because the home construction account is part of the mortgage, you also pay interest.
These interest and financing costs are deductible for two years in box 1, just like the mortgage interest deduction. In the first six months of the renovation, you do not even have to offset the interest paid with the savings interest that you receive. Since 2013, the building fund account must be taken out as a linear mortgage or annuity mortgage in order to be entitled to this. After two years, the building fund account falls under Box 3 as a debt.
Renovation costs deductible – Increase mortgage
Another way to finance a renovation is to raise the mortgage. You then actually take out an additional mortgage on top of the current mortgage. Since 2013, this mortgage is only deductible in box 1 if you opt for an annuity mortgage or a linear mortgage.
Borrowing money for renovation deductible – Personal loan
A personal loan means that you borrow a certain amount from the bank. You immediately start this loan with a fixed monthly repayment. If you choose this loan to finance a renovation, you pay slightly more interest than if you opt for a mortgage loan. The interest and financing costs of the personal loan are deductible in box 1, because you pay them off according to a fixed repayment schedule.
Renovation interest deductible – ABC credit
An ABC credit is about the same as a revolving credit, but you can only take out this loan if you have a home for sale. The interest you pay is slightly lower than the interest on a regular revolving credit. However, this loan is not very attractive for the renovation of your home. Both the ABC credit and the revolving credit are not deductible in box 1.
Renovation costs deductible 2017 – Box 3
If a loan for the renovation of your home does not fall in box 1, for example because you do not repay according to a fixed schedule, it falls in box 3. In this tax box you pay tax on your assets, such as savings and investments. You may deduct debts that do not fall in box 1 from your taxable capital in box 3 under certain conditions.
Only the part of the debt above 3,000 euros or 6,000 euros for tax partners is deductible from your assets. However, this is only interesting if your assets are higher than the tax-free limit of 25,000 euros or 50,000 euros for tax partners. But if that applies to you, you may want to consider paying part of the renovation costs with savings than financing the costs with a loan.