Japan ministry aims to extend 13-year tax deduction to 15 years
Home loan tax deduction may be reduced in 2022
According to Japan Property Central, the Japanese government looks to revise the one percent home loan income tax deduction down in 2022.
The current scheme allows home loan borrowers to subtract up to one percent of the balance of the mortgage from their income tax each year for 10-13 years following purchase.
The annual limit is capped at JPY400,000 (USD3,519).
Due to record-low interest rates, tax deductions have exceeded the annual interest payment of home buyers, as they have been able to obtain variable-rate mortgages as low as 0.4-0.5 percent.
Based on an investigation by the Board of Audit in 2019, as many as 80 percent of borrowers were receiving a tax deduction greater than their interest payment.
The Ministry of Finance suggested that the tax deduction be limited to the amount of interest paid by the borrower.
However, the Ministry of Land, Infrastructure, Transport, and Tourism (MLIT) is proposing a flat rate of 0.7 percent.
Meanwhile, some good news from MLIT is that the ministry aims to extend the 13-year deduction to continue for a term of at least 15 years.
Traditionally, the tax deduction only applies for the first 10 years of the loan. However, if the 10 percent consumption tax rate is applied to the sale price, then a special 3-year extension may be granted.
More: Tokyo’s office vacancy rate reaches 6.47% in October
Seeing that many real estate transactions aren’t subject to consumption tax, not all buyers are eligible for this extension.
The 15-year extension will be welcomed by developers and professional real estate flippers, but consumption tax must be applied to their transactions.
The Property Report editors wrote this article. For more information, email: [email protected].
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