Loan interests paid – itemized deduction from the personal income tax base

The taxpayer has the option to reduce his/her tax base by the interest paid on a building savings loan or mortgage in a tax period. The loan has to be se up in order to finance the housing needs of the taxpayer, his/her spouse, his/her offsprings, parents or grandparents of the maried couple. If the housing is also used for the purposes of self-employment or rental, the taxpayer can deduct proportionally the interest paid during the time he/she was using the housing facility for these purposes. The maximum deduction from all the loans in the same household can be in the amount of 150 000 CZK. If the interest is paid only for a part of the year, the applied sum should not exceed 1/12 of the maximum sum for each month of the interest payments. If there are more participants of full age, either one of them can apply for the reduction or all of them can apply for it proportionally.

Housing needs include:

• building of an apartment house, a detached house or a housing item, which does not include any non-residential premises other than a garage, a cellar or a utility room
• charged acquisition of  land, provided the building of a house starts within 4 years from the moment of the land acquisition or
• charged acquisition of an apartment house, a detached house or an apartment house or detached house under construction

If the subject of the housing need is an acquisition of land and the requirement for the start of the construction within 4 years from the moment of acquisition is not met, the taxpayer has to subsequently tax the amount the tax base was reduced by in the last 4 years.

The provider of a building savings loan or a mortgage provides the taxpayer with a confirmation of the amount of interest paid. When applying for a tax base deduction based on the interest paid, this confirmation has to be enclosed to the income tax return form. The tax authority also requires the building savings contract or a mortgage contract.