You have recently taken out an installment loan or a mortgage, and the pertinent question of the tax deductions or benefits you may be entitled to arises.
In Belgium, given the significance of the tax burden, looking into tax benefits that could reduce your overall taxable income is essential.
First, it is important to make a fundamental distinction between loans taken out for private purposes and those taken out for professional purposes.
Here is the current state of affairs.
Loans for professional purposes
Under Belgian tax law, an expense can only be considered deductible by the administration if it is intended to facilitate the earning of professional income. For example, the car a doctor buys to visit patients will only be deductible because it allows him to earn income from his professional activity. Conversely, some mixed expenses, i.e., those serving both professional and private life, are only partially deductible.
Thus, a loan intended to be essential for earning taxable professional income will be 100% deductible, including interest. Deductibility is generally spread through an annual depreciation percentage. For example, a car is depreciable over a maximum of five years. This method aims to spread costs over different fiscal years to distribute the tax burden over several periods.
Deductibility of your mortgage loan
In the realm of expenses useful to your private life, the only loan that is deductible or provides tax benefits is the loan used to acquire your first home: your mortgage loan.
In short, the tax deduction works as follows: you can deduct the repaid capital as well as the interest and insurance premiums, but the total of these amounts is capped at a maximum annual amount of €2,120 per person who took out the mortgage. For the first ten years, this amount is increased by €710, totaling €2,830 per person. If you have at least three children, you can add an amount of €70.
These increases are only valid for the first ten years and are only applicable if you are the owner of a single residence.
Conditions for deducting your mortgage loan from your taxes:
- The loan must be for a single house intended to be the main residence of the family;
- The loan must be secured with a mortgage;
- The loan term must be at least ten years;
- The loan must be taken out with a credit institution established in the EEA (European Economic Area).
