Deductions from capital income
You can claim deductions for the expenses associated with the production of capital income.
Expenses, interest and loans
You can claim expenses if you have spent money on management and safekeeping of corporate stocks, of other securities, and of investment-fund shares. This deduction is made against capital income. The Tax Administration receives almost all the information on asset-management expenses from banks, from other intermediaries and investment fund companies, in Finland and other countries.
The expenses you paid must exceed the own-liability threshold of €50. When you claim them, fill in the gross amount for the entire year without subtracting the 50-euro threshold from it.
Expenses for the production of income, deductible from your capital income, may include
- Phone expenses
- Computer and (broadband) connection expenses
- Purchase prices of books and other costs relating to work-related professional reading
The expenses must be related to your investment activities or other operations for the production of income.
When is it acceptable to claim a tax deduction for workspace expenses against income from capital?
If you work from home in order to gain or produce income from investments – often called capital income – a deduction based on home-office costs is acceptable against capital income.
- If you pursue this activity at your home on a full-time basis and the activity is continuous, you can claim €940 – the formula-based deduction.
- If the activity is pursued from time to time only, you can claim €235 – the partial formula-based deduction for a home office. However, to merely have a passive holding of various corporate stocks is not treated as working from home, so no expenses caused by a home workspace or office can be deductible.
Please note: related to individual taxpayers’ different types of received income, the maximum home office deduction can only be €940 in total (for the 2023 tax year), although several distinct work performances might be involved.
Example 1. Harvey is a wage earner, having a full-time employment. Harvey reads and watches news about the economy, business, and stock-exchange quotes. However, during a regular month, he only conducts very few transactions with his securities and stocks. He receives dividends every year from the stocks that he has held for a longer time.
Accordingly, the conclusion is made that Harvey’s investments are passive and geared for the long term. His trading with securities is a small, secondary activity when compared with his full-time employment. He cannot claim the standard formula-based deduction because he only pursues a small-scale activity at his home office in order to gain income from investments.
Example 2. Sirje is the owner of two apartments. She lives in one apartment and rents out the other on a short-term basis, typically through online vacation rental platforms. There are several guests every month.
As a result, Sirje uses a home office space for various kinds of management and maintenance work relating to the short-term rentals. She can claim the partial deduction of €235 because she works at her home, and her work is not full-time and not characterised by regular daily hours like a part-time occupation would be.
Example 3. Sami is an employee receiving wages and he works from home more than 50% of total hours. He can claim the standard formula-based deduction of €940 against his wage income. Although Sami also receives capital income, he cannot add any further home office deduction to the above total.
How much can be deducted?
You can deduct up to €5,000 of the annual contributions you pay for either voluntary pension insurance or a long-term savings contract.
How does this affect my tax assessment?
The contributions are deducted from your capital income in the year of payment.
If there is not enough capital income for the deduction to be made, the deduction is made from the tax on your earned income in the form of a special tax credit for a deficit. This special deficit credit is 30%.
If there is not enough tax on earned income, the Tax Administration will automatically apply the credit to your spouse’s taxes instead. If there is still not enough tax for the credit to be granted, part of the tax credit will remain unused.
You cannot claim allowable losses based on pension insurance or long-term savings contract contributions.
Who can make the deduction?
Only the insured person can deduct the contributions in their own taxation. For example, if your spouse has paid your insurance contributions, they cannot deduct the contributions in their tax assessment.
How much can be deducted?
Starting 2023, interest expenses on home loans are no longer deductible in taxation. You can no longer deduct interest on student loans, either.
Interest on a loan for the production of income is deductible in full. A loan for the production of income means that the loan has been taken out to generate taxable income. For example, you may have taken out a loan to buy an investment apartment, which will generate rental income for you, or shares, which will generate dividend income.
When can I get the deduction?
In 2023 and 2024, you can claim interest expenses on your loan only if the loan was taken out for the production of income. Check your tax return and tax card details to make sure that you have stated the purpose of the loan correctly. Correct the information if necessary.
How does the deduction affect my tax assessment?
Interest on loans for the production of income is primarily deducted from your capital income, such as rental income or capital gains. No tax deduction is available for repayments of the loan principal.
If there is not enough capital income for the deduction to be made, the deduction is made from the tax on your earned income in the form of a special tax credit for a deficit. The deficit credit is 30% of the interest amount. The maximum amount of credit is €1,400. 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.
If you have borrowed money from a company where you are a shareholder and paid capital-income tax on that loan, you are entitled to deductions when you pay the loan back.
These deductions must be claimed within 5 years after the year when you borrowed the money. If there is no capital income, or not enough taxable capital income to claim deductions from, you may deduct the payments in the form of a tax credit for a deficit in capital income against your income tax on earned income.
An aftermarket bonus is an income item similar to interest income. You may receive an aftermarket bonus if you have owned bonds and sold them. It relates to the period between the latest date when you received interest on the bonds and the date when you sold them. When the buyer who buys your bonds pays you compensation, it is called an aftermarket bonus. If you are the buyer and you pay aftermarket bonus to someone, you can treat it as an expense for the production of income. It entitles you to a deduction.
Losses
Losses that have been allowed for carryover can be deducted later. The income type for such deduction must be the same as the type of income where the loss occurred. This means that you cannot deduct a loss associated with your earned income from your capital income and vice versa.
In addition, the losses must be claimed against the same source of income as where they arise: you cannot deduct a loss incurred in a business operation from profits originating from farming (agricultural operation), and similarly, you cannot deduct a loss that relates to agriculture from the profits of a business operation.
If you have sold or otherwise transferred some property and made a loss, you can claim a deduction against any type of capital income.
If you have no capital income or if you have less capital income than what the deductible capital loss amounts to, the deduction is carried forward to the following five years. You cannot receive a tax credit for deficit in the taxation of earned income due to a capital loss.
Smaller capital losses are not deductible: if the total of the acquisition costs of the sold assets is no more than €1,000 during the tax year, no deduction is granted.
Claim deductions in MyTax or complete Form 9 Capital gain or capital loss
You are entitled to claim deductions for an agricultural or business loss, on the condition that you make the claim before the tax assessment process has ended for the tax year concerned.
This way, if you are a partner in a farming consortium and the farm has made a loss, or the operation has been terminated and the final result is a loss, you may claim for the loss to be deducted from your capital income. Enter the loss claim in your pre-completed tax return.
If deductions from capital income exceed the amount of capital income, there is a deficit.
If the amount of income tax, payable on your earned income, is not high enough to deduct the deficit, a loss in the capital-income category will be recorded in your taxation. The allowable loss can be carried forward for 10 subsequent years, and you can claim it from whatever capital income you have during those years.
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