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PRESS RELEASE

(Source : Government Information Centre)

Home loan interest deduction raised to maximum $150,000

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The Chief Executive announced in the 2001 Policy Address today (October 10) that the Government will propose to the Legislative Council to increase the maximum amount of home loan interest deduction, for 2001/02 and 2002/03 years of assessment, from $100,000 to $150,000. This is to ease the burden of homeowners under the present economic situation.

The implementation of the proposal will result in a reduction of the tax liabilities of those homeowners liable to Salaries Tax or tax under Personal Assessment and paying, in 2001/02 and 2002/03, home loan interest in excess of the present deduction ceiling. The maximum tax saving for a taxpayer will be $8,500.

It is estimated that, for each of the two years (2001/02 and 2002/03), about 110,000 taxpayers (or 9% of the taxpaying population) who are homeowners will benefit from the proposal. The cost to revenue is estimated to be in the order of $1 billion.

The implementation of the proposal will necessitate legislative amendment. There is no need for taxpayers to make any claim at this moment. They should claim the enhanced amount in their 2001/02 tax returns to be lodged in May next year. The Inland Revenue Department will inform taxpayers of the details later.

Example:

Mr. Chan is married with annual income of $600,000. He lives in his own property with his wife and 2 children. Total home loan interest paid by him in 2001/02 (year of assessment) is $160,000.

  Present tax payable Tax payable after the proposal Tax saving
       
  ($) ($) ($)
       
Income 600,000 600,000  
       
Less: Home loan interest 100,000 150,000  
       
deduction (maximum amount)      
       
Allowances                   276,000 276,000  
       
  ------- -------  
       
Net Chargeable Income 224,000 174,000  
       
       
Tax payable 27,580 19,080 8,500
       
       
Attached is a table of relevant statistics:    
     
     
Home Loan Interest Deduction      
       
       
    1998/99 1999/2000
       
Total number of individuals with home loan 250,000 300,000
     
interest deduction      
       
       
Total amount of home loan interest deducted $11.9b $13.7b
     
       
Total number of taxpayers with maximum amount 110,000 110,000
     
of home loan interest deduction      
       

 

End/Wednesday, October 10, 2001

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