Commission approves draft law to end tax exemption for interest on mortgages | News
Finance Committee Chairman Erki Savisaar said that under the bill, it will no longer be possible to deduct interest paid on home loans in tax returns to be filed for 2022.
“The bill will not change the general ceiling for the deduction from taxable income, which remains at €1,200. The taxpayer will be able to deduct, for example, training expenses incurred and donations made, up to the amount of the previous mortgage interest deduction, if these deductions were not previously used due to the cap,” Savisaar said.
The Center Party MP added that to make it easier for young families to buy housing, Kredex has drawn up a measure to direct aid more efficiently and in a more targeted manner to those in need. According to him, regional specificities are also taken into account.
Since the deduction of interest on a home loan is limited to €300, the maximum impact of the change for the taxpayer is €60 per year.
Deputy Chairman of the Finance Committee Aivar Kokk (Isamaa) said the government is pursuing a tax policy hostile to landlords.
“The removal of mortgage interest relief affects nearly 130,000 people,” said opposition MP Isamaa.
The bill amending the Income Tax Act, initiated by the government on May 31, aims to abolish the right to deduct interest on mortgages, because according to the Finance Committee, it no longer fulfills its aim to reduce the impact of high interest rates on interest rate loans to make home loans more accessible, and higher income households in particular benefit from the exemption.
The lifting of the exemption has been recommended to Estonia by the Organization for Economic Co-operation and Development (OECD) on the grounds that it primarily benefits households with the highest incomes and thus increases inequalities.
The Riigikogu plenum will hold the first reading of the bill on June 14. The Finance Committee proposed that the first reading be concluded.