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Tax Information :
Individuals :
Deduction for Home Loan Interest
Eligibility For
Deduction
Home loan interest paid is deductible from your assessable income
under salaries tax or from your total income under personal assessment.
A person chargeable to tax at standard rate is also entitled to
the deduction.
All the following conditions must be satisfied before
the deduction is granted:
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you are the owner of the dwelling (either as a sole owner,
a joint tenant or a tenant in common);
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the dwelling is a separate rateable unit under the Rating
Ordinance, i.e. it is situated in Hong Kong ;
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the dwelling is wholly or partly used by you as your place
of residence in the year of assessment;
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home loan interest is paid by you during the year of assessment
on a loan for acquisition of the dwelling;
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the loan is secured by a mortgage or charge
over the dwelling or over any other property in Hong Kong;
and
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the lender is an organization prescribed under Section
26E(9) of the Inland Revenue Ordinance, i.e.
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the Government, |
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a financial institution, |
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a registered credit union, |
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a licensed money lender, |
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the Hong Kong Housing Society, |
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your employer, or |
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any organization or association approved
by the Commissioner of Inland Revenue. |
Car Parking Space
Prior to the enactment of the Inland Revenue Amendment
Ordinance 2004 on 25 June 2004, home loan interest paid for the
acquisition of car parking space is deductible only if the car parking
space is valued together with the dwelling acquired as a single
tenement under the Rating Ordinance. This restriction is removed
by the aforesaid amendment ordinance, which has retrospective effect
from the year of assessment 1998/99. Subject to the fulfillment
of other criteria for entitlement, home loan interest paid for the
acquisition of car parking space is deductible if the car parking
space is located in the same development of the dwelling in respect
of which home loan interest is also claimed for the same year of
assessment and the car parking space is for use by the owner.
Taxpayers who may benefit from the aforesaid amendment
ordinance and who have not been previously granted deduction of
home loan interest paid during the years of assessment 1998/99 to
2003/04 for the acquisition of car parking space can apply to claim
back the interest paid for the relevant years. The applications
have to be made within 12 months after the date of enactment of
the amendment ordinance (25 June 2004) or within 6 years after the
end of the relevant year of assessment, whichever is the later.
Amount Of Deduction
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If you are a sole owner of the dwelling, the
amount deductible is the home loan interest actually paid
by you in the year of assessment, subject to a maximum deduction
for the year of assessment as specified. The maximum limit
is:
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2002/03 |
$150,000
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2003/04
onwards |
$100,000
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[See Scenario No. 1
]
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If you are a joint tenant or tenant in common
of the dwelling, the home loan interest is regarded as having
been paid by the joint tenants each in proportion to the number
of joint tenants, or by the tenants in common each in proportion
to his or her share of ownership in the dwelling. The amount
of allowable deduction for you is calculated accordingly.
In each case, the maximum deduction is also similarly reduced
. [See Scenario No. 5
and Scenario No. 6
.]
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If the home loan is applied, or the dwelling
is used, partly for purposes other than as your place of residence,
the amount of deductible home loan interest paid would be
reduced accordingly. [See Scenario
No. 7 and Scenario
No. 8 .]
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Home loan interest paid before the dwelling
is used as a place of residence (for example, during construction
period) is not deductible. [See Scenario
No. 2 .]
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If you own more than one place of residence,
you are only entitled to claim the deduction in respect of
your principal place of residence. Likewise, where
a husband and wife each owns a dwelling separately, only one
of them is entitled to claim the deduction in respect of the
dwelling which they regard as their principal place
of residence.
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Revenue Bill 2006 has been passed on 24 May
2006 to extend the deduction period for a further 3 years
to a total of 10 years, subject to a maximum annual deduction
of $100,000. The deduction takes restrospective effect as
from the year of assessment 2005/06.
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The deduction is granted to each person only
for 10 years of assessment, whether continuous or not. Where
the deduction is granted to you, your deduction status will
be shown in a notification from the Commissioner.
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Deduction
For Married Persons
There are 4 situations:
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Separate taxation under salaries
tax |
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In general, the income of a husband
and wife is assessed separately under salaries tax. They should
claim the deduction separately in their respective tax returns.
[See Scenario No. 14
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Joint assessment under salaries
tax |
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Where a husband and wife both
have assessable income chargeable to salaries tax and one
of them has income less than the total of allowable home loan
interest and personal allowances, (that is, exempt
from salaries tax ), the couple may elect joint assessment
so that the relevant home loan interest would be deductible
from their aggregate assessable income. [See Scenario
No. 15 .] |
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Nomination of spouse to claim
the deduction under s.26F of the Inland Revenue Ordinance |
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Where either a husband or a wife,
being owner of the dwelling, has no salary income,
rental income or profits chargeable to tax during the
year of assessment, he/she may nominate the other spouse to
claim the deduction. Nomination must be made year by year
and it requires the nominating spouse to sign on the nominee's
tax return to signify his/her agreement to the nomination.
The owner (but not the other spouse to whom the deduction
is actually granted) would be regarded as having been allowed
the deduction for a year of assessment. ('No profits chargeable
to tax' includes a loss case.)
Home loan interest deduction is only allowable under salaries
tax or personal assessment. So, if the spouse (owner of the
dwelling) does not have salary income but other chargeable
income (e.g. rental income or business income), the couple
have to elect personal assessment in order to claim his/her
home loan interest entitlement. [See Scenario
No. 17.]
Nomination is restricted to spouse. For example, a father
cannot nominate his son to get his entitlement. |
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Personal Assessment |
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Where a husband and wife elect
personal assessment, the allowable home loan interest paid
by a husband or a wife is first deducted from the total income
of the relevant spouse. Any part of the deduction not fully
utilised would be set off against the other spouse's total
income but any excess would not be carried forward to be set
off against either spouse's total income for future years
of assessment. [See Scenario
No. 17 .] |
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Different
Scenarios on Deduction of Home Loan Interest
See Different Scenarios on
Deduction of Home Loan Interest for the 18 scenarios
on deduction of home loan interest. |
Revocation Of Claim
Where the deduction has been taken into account in ascertaining
a person's tax liability under salaries tax or personal assessment,
any revocation of claim should be made in writing within 6 months
after the date of the Commissioner's notification.
Other Points
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Transfer of home loan interest
and nomination of home loan interest claim are only applicable
to married persons. |
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The Commissioner will issue
a deduction status notification only to a taxpayer who has been
allowed the deduction in his/her own right or a person who has
nominated the other spouse to claim the deduction under s.26F
of the Inland Revenue Ordinance. |
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A person, who has claimed for the deduction, will not
be regarded as having been allowed the deduction if his assessable
income is less than his personal allowances (that is, he is
exempt from tax even if the interest deduction is not granted)
and his home loan interest is not transferred to the spouse.
No deduction status notification will be issued in such case.
[See Scenario No. 13
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How To
Lodge a Claim
Claims should be made in the Tax Return - Individuals
(B.I.R. 60) for the relevant year of assessment. You should complete
Part 7.1 and 7.3. If the interest payments involving re-mortgaged
loan, you should also complete Part 7.4.
Documentary Evidence Required
You are not required to attach any proof of the interest paid when
you submit your tax return. However, you must keep and retain relevant
documents for 7 years.
For the purpose of processing the claim, the
Assessor may ask you to produce the following documents :-
proof of ownership
of the dwelling;
proof of dwelling
being used as your place of residence;
loan agreement or
mortgage deed; and
receipts for repayment
of loan.
Offences and Penalty
The Inland Revenue Ordinance imposes heavy penalties
on any person who without reasonable excuse :
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makes an incorrect statement
in connection with a claim for any deduction or allowance; or |
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gives any incorrect information
in relation to any matter or thing affecting his own liability
to tax or the liability of any other person. |
Questions and Answers on
Deduction of Home Loan Interest
For common enquiries on Deduction of Home
Loan Interest, please click here.
Further Information
See
Department
Interpretation and Practice Notes No. 35 : Home loan interest
For further enquiry, please call us at 187 8088.
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