How much mortgage interest deduction will you receive in 2022 and 2023 via an annuity mortgage? How much can you still deduct under an annuity? New rules apply to the mortgage interest deduction for 2022 and 2023. The changes: only mortgage interest deduction if your mortgage is financed on an annuity or linear basis. A linear mortgage can therefore also be taken out with mortgage interest deduction and is in most cases also cheaper. With the annuity mortgage or the linear mortgage, you repay part of the mortgage every year, which means that the mortgage interest you have to pay, but also the mortgage interest deduction, is lower. is then normal. What does this limitation on mortgage interest deduction look like and what are the conditions? The maximum period of deduction is now thirty years. You will notice it in your wallet, but there are also benefits. What is a linear mortgage, what is an annuity mortgage?
Annuity (annuity mortgage) or linear? Which mortgage do you have?
Many types of mortgages are available in our country. From conservative to exotic. From paying off a fixed amount every month to paying off nothing and checking after 30 years whether enough capital has been built up to pay off the mortgage. In 2022 and 2023, this fully interest-only mortgage may only cover 50% of the value of your house when taking out a new mortgage. Many had previously taken out a fully interest-only mortgage, a savings mortgage or bank savings mortgage and can keep them. The type of mortgage you have is important for the mortgage interest deduction.
What is a linear mortgage 2022 and 2023, advantages of a linear mortgage, differences with annuity mortgage
With a linear mortgage, you repay 1/30th of the mortgage annually or 1/360th monthly. After thirty years, your mortgage will be fully repaid. With a mortgage of 210,000 euros, you pay the same 7,000 euros in repayments annually. Because the debt decreases so quickly, you will soon pay less mortgage interest. A big advantage. With an annuity mortgage, you also repay, with the understanding that your repayment increases annually. For both forms of repayment, the mortgage interest for new mortgages in 2022 and 2023 is fully deductible from income tax. The big difference between annuity and linear is the monthly costs. In the first years, the linear mortgage is more expensive, but later the annuity mortgage is more expensive. An advantage is that death insurance with a linear mortgage is also cheaper.
Mortgage interest rate and mortgage interest deduction for home ownership
The more mortgage interest you pay, the greater the mortgage interest deduction becomes. This makes it more attractive to have a debt that is not or hardly repaid than a debt that is becoming smaller and smaller. The counterpart is that you are taking an increased risk, because you may be left with a residual debt for your home when you sell. And that increased risk becomes increasingly manifest when the economy is doing less well. This extra risk can hit you, but it can also hit the bank.
Mortgage interest deduction and paying taxes
The mortgage interest deduction ensures that you have to pay less tax. This means that your net expenses for your own home are lower than the gross mortgage costs. In itself a good thing, because the state likes to encourage home ownership. Moreover, although the mortgage interest deduction costs the government money, it is also offset by all kinds of additional income and taxes on the owner-occupied home.
Cut back on the mortgage interest deduction, via an annuity mortgage (annuities) or linear mortgage
In principle, you can cut back on the mortgage interest deduction in many ways:
- Limit the deduction further in time;
- Only make the deduction possible at an eventual 30% or 40%;
- No longer allow full mortgage interest deduction if repayments are not made, but make an annuity or linear repayment mandatory.
Further limit the deduction over time, currently it is still thirty years
Currently, the mortgage interest on your own home is deductible for a maximum of 30 years. That thirty years can be further limited. First to 25 years, then maybe 20 years. The question is whether this is also possible for existing mortgages and fortunately this is not yet in the plans.
Enabling the deduction at 30%
Someone with a higher income can get almost half of the mortgage interest deductible, which is the mortgage interest paid minus the notional rental value, back from the tax authorities. With the annual tax return or monthly. All in all, that could be a large tax refund. It is conceivable to gradually reduce the maximum percentage at which the deduction may take place to 30% as in box 3. But beware, a reduction has already been initiated for higher incomes.
No longer allowing full mortgage interest deduction, but annuity or linear, the differences
Another option is to pretend that you have an annuity mortgage, whatever mortgage you have. You then keep your mortgage and the Tax Authorities use tables to indicate what is tax deductible with an annuity. The Spring Agreement stipulates that the interest deduction on new mortgages must be repaid at least on an annuity basis. Linear is also allowed.
Consequences of annuity or linear mortgage interest deduction for interest and interest deduction
The consequences of the system are major. Because repayments are being made or it is assumed that repayments will be made, the mortgage interest deduction is declining rapidly. Anyone who still has 4,000 euros in mortgage interest deduction in the first year will see this drop to 3,000 euros after 10 years, halved after 20 years and then the deduction quickly decreases. This is even faster linearly than annuity.
Limit mortgage interest deduction
It has been decided that for new cases the mortgage interest deduction:
- It is only deductible for an annuity or linear mortgage;
- The maximum deduction decreases by 0.5% annually, ultimately resulting in a tax rate of 38% for higher incomes;
- The maximum deduction rate decreases by 0.5% every year;
- The interest on the residual debt is deductible as mortgage interest for a maximum of 10 years;
- There is a transitional arrangement for existing mortgages.
It is said that this will remain the case, but the future will tell whether this is the case. As indicated, there are still plenty of opportunities to further fill the treasury.
Box 1 exemption KEW
The KEW will be maintained for existing mortgages. When you sell your home, you can use the accrued capital tax-free to pay off your mortgage, but the time constraints will disappear. If the accrued capital is higher than the mortgage, you will pay tax on part of the capital paid out. When you move, the mortgage can sometimes also be taken to the next home.
Finally, limitation on mortgage interest deduction and the new rules
A limitation on the mortgage interest deduction is painful. How much pain that causes depends on your situation. The higher your income, the greater the pain can be, but more and more incomes will be confronted with a maximum deduction that decreases annually. The mortgage interest deduction will therefore yield less and less tax profit.
- Mortgage interest deduction is much more limited than you think
- Calculate mortgage annuities for 2021 and 2022 – benefits