How do you get the maximum out of your home loan for tax purposes?

Borrowing to acquire a house or apartment is encouraged for tax purposes. This applies not only to those who want to invest in their own home, but also to those who take out a loan for a property that they subsequently want to rent out.

Own house

Own house

Anyone who takes out a loan for a house that he is going to purchase himself is entitled to a tax reduction from the Flemish region.

To find out the exact amount of that benefit, you need to find out how much you can deduct in your tax return.

The formula is as follows: you take the amount that you repaid to the bank that year (interest plus capital repayments) and add the premiums for the outstanding balance insurance. The amount is then limited to 1,520 USD. During the first ten years of your loan, you can increase this limit by 760 USD if it concerns your only home. And possibly another 80 USD if you had at least three children when taking out the loan.

If you paid more than this maximum, this maximum amount applies. You will then receive a tax reduction of 40%. In the most favorable case, this concerns: 1,520 USD + 760 USD + 80 USD, or 2,360 USD x 40%, or 944 USD.

Maximum benefit

Maximum benefit

It is important that this deduction applies per person. For a couple that buys a house together and takes out a loan for it, both partners can therefore fill in this deductible item.

The basket can nevertheless fill up quite quickly. Anyone who takes out a loan of 100,000 USD over 20 years at an interest rate of 2% must pay 505.03 USD monthly. That is 6,060.36 USD annually. That is more than enough to give two partners the maximum tax benefit.

Limit your mortgage

Limit your mortgage

Anyone who has a solid file can take advantage of it. To be entitled to a tax reduction it is necessary that the loan is of a mortgage nature. However, since there is no additional tax benefit above a certain ceiling, you can ask for this part to replace the guarantee with a mortgage mandate. The bank is hereby given the right to register the mortgage when it deems it necessary. That formula is cheaper than registering a mortgage directly.

Borrowing for an investment property

Borrowing for an investment property

Even if you borrow money for a property that you will not occupy yourself, you are still entitled to a tax benefit. This is a tax reduction from the federal government. This amounts to 30% and is calculated at 169.20 USD + 6% of your net taxable professional income, with a global maximum of 2,310 USD. In the best case, you therefore have to pay 693 USD less taxes.

Please note: the maximum of USD 2,310 includes both the capital repayments of the loan and the premiums for the outstanding balance insurance and the premiums that you paid for long-term savings through a life insurance policy. Interest may then be deducted from the real estate income of your second home.