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Home loan interest deduction- further charge or re-financing

Taxpayers will apply to the bank for a mortgage when purchasing a residence. The loan granted by the bank is usually used to pay the final balance of the property price of the residence. Therefore, the total amount of interest on the annual end notice issued by the bank each year belongs to the purchase of the residence and is deducted in full. If part of the loan is used for other purposes, such as investment, decoration, etc…, the interest generated from this part of the loan cannot be deducted. In the future, if taxpayers apply for a mortgage-based loan, the interest paid does not belong to the purchase of the residence, so they cannot claim the deduction. In addition to the mortgage, in order to save interest, the taxpayer may arrange for the re-financing of the residential building. If the new remortgage loan exceeds the loan owed by the old mortgage, the interest generated by the excess loan cannot be deducted. Taxpayers must take care to keep all the final documents of the old mortgage to provide the Inland Revenue Department to calculate the actual amount of interest deductible.

The above information is for reference only. If in doubt, we welcome your tax inquiries

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