Possibility to deduct interest on loans extended

During the second reading on 5 March 2025, an amending proposal was submitted in the chamber of deputies extending the possibility to deduct interest from an individual’s income tax base: apart from interest on mortgage loans, it may now also be possible to deduct interest on housing cooperatives’ loans.

Under the current wording of the Income Tax Act, subject to certain conditions, individuals may deduct from their tax base interest on loans under building savings plans, mortgage loans, or loans provided by a bank or a building society if they use them to finance their housing needs.

Cooperative housing is usually associated with the payment of an annuity – an obligation to repay a portion of the housing cooperative’s loan corresponding to the taxpayer's share in the cooperative, including the portion of the interest on the loan that the cooperative pays. Up until now, individuals have not been able to deduct this interest from their income tax base.

The proposed change would allow taxpayers to deduct from their tax bases a pro rata portion of interest on the cooperative's loan corresponding to their share in the cooperative.

The proposal also contains several conditions for claiming the deduction: the taxpayer must be a member of the housing cooperative and must pay interest on the housing cooperative's loan – usually as part of the annuity, and the apartment must be used for the permanent residence of the taxpayer or their close relatives. Other conditions applicable under the previous wording, e.g., a maximum possible deduction in a taxable period, will also apply.

The effective date is proposed to be 1 January 2026. Taxpayers may therefore be able to claim these deductions for the 2026 taxable period regardless of the date of their membership in the housing association or the conclusion of the loan agreement.