Deduction for home loan interest
If you have a home loan, you can no longer be given tax deductions for its interest expenses. The change in tax rules came into force on 1 January 2023. No more deductions are available regarding home loans (for purchasing a permanent dwelling) and loans, credits and other borrowing related to home repair. The year’s interest expenses are still shown on your pre-completed tax return. However, they are shown for information only, not for a deduction purpose.
If you have taken a loan that you have needed in order to gain or produce income, you can get deductions. A loan for the production of income, the only type of loan with deductible interest, is a loan you take in order to borrow money for gaining or producing taxable income – a typical example is to buy an apartment that you want to rent out to tenants, so you can get rental income.
Deduction for home loan interest, year to year
| Interest expenses paid during: | How much of the interest is deductible: |
|---|---|
| 2024 | 0 % |
| 2023 | 0 % |
| 2022 | 5 % |
| 2021 | 10 % |
Deductions for loans taken for investing in residential property
If you have borrowed money to buy residential property in order to rent it out, you can deduct all the related interest expenses. This is considered a loan for the production of income, i.e. you receive taxable income from the investment you made with the borrowed funds. For example, if you rent out an apartment you own and receive rental income for it, that is considered production of income.
In addition to the interest expenses, you get deductions for any bank charges.
Interest expenses on loans for the production of income are primarily deducted against your capital income, such as dividends or rental income. If you have no such income, there will be a credit from your earned-income taxes amounting to 30% of the interest expenses. Earned income includes wages, pensions and social benefits received from Kela, the Social Insurance Institution of Finland.
The maximum tax credit for a deficit in capital income is €1,400 per year. For couples, it is €2,800 per year. The maximum credit is raised by a further €400 if you have a child under 18 years, and by €800 if you have two or more children under 18 years. Read more about credits for a deficit in capital income (available in Finnish and Swedish, link to Finnish)
Interest deduction for other types of home loans
If you take a loan in order to buy a summer house or other leisure property, the interest expenses for it are non-deductible. In tax assessment, this loan is treated as consumer borrowing, or "other loan".
If a child or a grandparent lives in a home you have bought with a loan, and you let them live rent-free or on a below-market rent, the interest expenses related to the property are non-deductible. In tax assessment, this loan is treated as consumer borrowing, or "other loan".
A typical part-time arrangement involves a summer home used by the family during a certain season only, and rented out to tenants for the remainder of the year.
In tax assessment, the purpose of any loan taken for the leisure property will be split accordingly
- for the months when the summer home is rented out: the loan purpose is for the production of income, and
- for the months of own-family use: the loan purpose is consumer borrowing.
The deductibility of interest expenses depends on what the loan’s purpose is. You can inform the Tax Administration of any new or changed purpose of use of a loan when making corrections to your pre-completed tax return.
As with other home loans, from 1 January 2023 on the deductions that used to be available to first-time homebuyers are withdrawn as well.
First-time homebuyers’ home loans were different from other home loans because a higher tax credit was available, increasing the sum of the credit by 2 percentage points. At present, the higher credit is no longer available, either.
Read more about credits for a deficit in capital income (available in Finnish and Swedish, link to Finnish)
Under the old tax rules, dwellings were considered a first permanent home if the following conditions were fulfilled:
- You bought it for your (family’s) residential use.
- You owned at least 50% of it.
- You never previously owned 50% or more of any residential property.
Although you can no longer get deductions for the interest you paid, but if you need to claim an adjustment to your 2021 or 2022 tax assessments, the above information may be useful.
Inform the Tax Administration of your interest payments for a loan related to you production of income
Interest expenses on loans for the production of income can be included in the calculation of the withholding rate stated on your tax card.
Read more about changing the withholding rate on tax card
Your bank informs the Tax Administration on your interest expenses
Your bank gives the Tax Administration information on your loan and its interest expenses. This information is transferred to your pre-completed tax return. Accordingly, your home-loan interest expenses continue to be pre-completed. However, they are shown for information only, not for a deduction purpose.
Check the amounts and the purpose of the loan. If the loan purpose is not stated correctly in your tax return, fill in the loan’s correct purpose and the bank's code number of the loan in the additional information section.
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