Posted on 01 March 2022
Which deductions for the year of acquisition of your property?
With the strong inflation of real estate prices, owning your main residence has become a priority. Many hope to resell it later and realize a capital gain. However, there is no need to wait for the resale of the property to benefit from certain advantages
The year of acquisition of the property, you can make several deductions relating to the purchase of your property.
What are these deductions? How can you take advantage of them?
As for a main residence acquired several years ago, you can deduct the interest charges on your real estate loan on your Luxembourg tax return.
Note that if you are purchasing a property under construction or renovation, there is no limit on the deduction of interest expense during the period when the property is not occupied by the owner. Once the property is occupied, the traditional ceiling applies.
The year of acquisition is special because the taxpayer has the possibility to deduct the mortgage fees as well as the bank commission fees.
In order to do so, you must of course have been exposed to these costs and be able to justify them. It will therefore be necessary to provide the notary's invoice attesting to the amount paid under the mortgage.
Attention: This is the notary's invoice for a "Credit opening". The invoice for the deed of sale, which includes the registration fees, is not deductible on the tax return in Luxembourg.
In the same way for the expenses and banking commissions for the opening of credit, it will be advisable to provide a receipt of the bank in order to prove these amounts.
Example:
Charlotte, single without children, buys her main residence on 01.01.2021 and moves in on 01.05.2021.
She has paid in 2021:
5 500 euros in interest charges on her home loan
8 000 euros in notary mortgage fees
3 000 euros in file fees and bank commission
Prorata for interest expense:
Period not occupied by the owner: 5 500 x 4/12 = 1 833.33 euros
Period occupied by the owner: 5 500 x 8/12 = 3 666.66 euros
Rental loss: 1 833.33 + 8 000 + 3 000 = 12 833.33
To be reported = 12 833.33
Interest expense: 3 666.66 euros but maximum of 2 000 euros per year
To be reported = 2 000 euros
In total, Charlotte can therefore deduct 14 833.33 euros on her Luxembourg tax return and enjoy tax benefits!
Do you find these calculations too complicated? On taxx.lu, there is no need to do them yourself: the system automatically calculates the amounts to be deducted and inserts them in the corresponding fields on your tax return! A real time saver!
