Increasing ceiling amount for concessionary deductions allowable for home loan interest and domestic rent

To help promote fertility and create a children-friendly environment, the Chief Executive proposed a series of measures in his 2023 Policy Address which included, starting from the year of assessment 2024/25, to raise the deduction ceilings for home loan interest or domestic rent from the current $100,000 to $120,000 for the taxpayers who reside with their child. Subject to the passage of the relevant Bill, the implementation framework will be as follows:

Eligible persons

A taxpayer chargeable to salaries tax or with tax charged under personal assessment, if all of the following conditions are met, he / she may be allowed additional deduction of home loan interest or additional deduction of domestic rent (collectively referred to as “additional deductions”):

(a)	The taxpayer resides, during the year of assessment concerned, with his / her child in Hong Kong for:
	(i)	a continuous period of not less than 6 months; or
	(ii)	a shorter period that the Commissioner of Inland Revenue considers reasonable in the circumstances;

(b)	The child:
	(i)	was born on or after 25 October 2023; and
	(ii)	is, at any time during the year of assessment, under the age of 18;

(c)	The amount of home loan interest paid or the qualifying rental amount paid is larger than the home loan interest basic deduction ceiling amount or the domestic rent basic deduction ceiling amount (collectively referred to as “basic deduction ceiling amounts”) for the relevant year of assessment;

(d)	The taxpayer elects in writing to use home loan interest basic deduction ceiling amount or domestic rent basic deduction ceiling amount, and their respective additional deductions ceiling amounts to determine the amount of home loan interest deduction and domestic rent deduction.

Amount of allowable deduction

At present, the Inland Revenue Ordinance provides that the taxpayer may be allowed deduction of home loan interest or domestic rent if the prescribed conditions are met.

In general, from the year of assessment 2024/25 onwards, if the conditions in items (a) to (d) above are met, apart from the aforementioned deduction of home loan interest or domestic rent, the taxpayer may be allowed additional deductions capped by the ceiling amount of $20,000. Hence, coupled with the basic deductions ceiling amounts of $100,000, the increased deduction ceiling amount is $120,000.

(a)	Home loan interest additional deduction
	If the taxpayer is a sole owner of the dwelling and use it exclusively as his / her principal place of residence, the maximum amount of additional deduction ceiling amount that can be used by a taxpayer is $20,000 for each year of assessment. If, however, the taxpayer is a joint tenant or tenant in common of the dwelling, the maximum amount of additional deduction ceiling amount has to be reduced in proportion to his or her share of ownership in the dwelling.

(b)	Domestic rent additional deduction
	If the taxpayer is not married; is the sole tenant under the qualifying tenancy; and use the rented domestic premises exclusively as his / her principal place of residence, the maximum amount of additional deduction ceiling amount that can be used by a taxpayer is $20,000 for each year of assessment. If there is more than one tenant under a qualifying tenancy, the maximum amount of additional deduction ceiling amount has to be reduced in proportion to the number of co-tenants.

	If the taxpayer is married, either the taxpayer or his / her spouse or both of them are the tenant(s) of the qualifying tenancy, and both of them elect to use domestic rent additional deduction ceiling amount, the maximum amount of additional deduction allowable to the couple is $20,000.

Number of years available for the deduction of additional deductions

Each taxpayer is entitled to claim the home loan interest additional deduction or domestic rent additional deduction for an aggregate of 19 years of assessment, whether continuous or not.

Notwithstanding this, for home loan interest, the additional deduction should not be allowable to the taxpayer if the deduction of home loan interest has been allowed to the taxpayer for 20 years of assessment, regardless of whether any additional deduction ceiling amount for home loan interest has been used to determine the amount of deduction for any of those 20 years.

Revocation of a claim for additional deduction

If the taxpayer has been allowed home loan interest additional deduction or domestic rent additional deduction but wishes to revoke the relevant claim for additional deduction, the taxpayer needs to revoke his / her claim in writing within 6 months following the date of the Commissioner’s notification.

When the taxpayer revokes his / her claim for additional deduction, the claim is regarded as not having been made. The year of assessment to which the revocation relates will not be regarded as having been allowed the additional deduction.

Further Information

More information is available through the following links:

Frequently asked questions
Illustrative examples
- Home loan interest additional deduction
- Domestic rent additional deduction