Deductions from capital income
You can claim deductions for the expenses associated with the production of capital income.
Expenses, interest and loans
Expenses for the production of income, deductible from your capital income, may include:
- Phone expenses
- Computer and internet 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.
Additionally, you may be entitled for a deduction for workspace expenses, which also is deductible from capital income. The size of this deduction depends on whether the income-producing activities are treated as your main occupation or a pursuit of side income.
If the expenses have to do with the management or safekeeping of securities, shares, book-entry holdings or similar, you must first subtract €50 which is your own liability. However, you must report the expenses on your tax return in full, without subtracting the €50.
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?
In 2022, you can deduct 5% of your home loan interest. Starting 2023, tax rules no longer allow deductions for paid interest expenses of home loans.
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, you can deduct interest on a loan only if the loan was taken out for the production of income. No deduction can be made on the home loan or student loan interest.
You can still deduct 5% of the interest on a home loan in your tax return for 2022. If you have a first-time home, check your tax return to make sure that the purpose of your loan is stated correctly. If it is not, correct the loan’s purpose of use to first-time homebuyer’s home loan. Starting 2023, no deduction can be made on the first-time homebuyer’s home loan.
How does this affect my tax assessment?
Interest expenses are primarily deducted from your capital income, such as rental income or capital gains. Loan repayments are not tax-deductible, except for student loan repayments.
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. For interest on a first-time buyer’s home loan, the credit is 32%. 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 for a capital loss 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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