Very few people know this, but thanks to the interest on a loan, it is entirely possible to reduce, or even cancel, the real estate income you declare each year. Let’s explore which loans are applicable.
When you become the owner of a real estate property, you are taxed in two ways. On one hand, there’s the annual property tax, and on the other, the income tax declaration. Indeed, your real estate income is taxed in the same manner as your other income, except it is subjected to a maximum tax rate of 50%.
However, it is entirely possible to reduce, or even cancel, your taxes on real estate income thanks to a loan taken to finance the purchase, construction, or renovation of a real estate property. In fact, the amount of your loan’s interest can be deductible even if it matches the amount of your entire real estate income.
Let’s take the case, for instance, where you pay €400 in interest per month (that’s €4,800 annually) for a loan used to purchase a rental building. If your real estate income reaches €6,000, you would only be taxed €1,200. Ultimately, you’d only pay €600 in taxes instead of €3,000 if you had no loan.
Which loans are eligible?
The type of loan doesn’t matter. You simply need to be able to prove that it is related to one of your properties. Consequently, your loan can be an installment loan or a a mortgage loan. In summary, you can deduct the interest on a consumer loan, provided it was taken out for one of your real estate properties.
Need to finance the construction or renovation of your home? Feel free to contact our services for any loan requests or additional information regarding our different credits.
