At the end of the year, when discussing real estate and tax deductions, it is usually found that only mortgage interest can be deducted from taxable income. However, in 2017, in addition to deductions under the government's economic stimulus measures, such as the 'Shop for the Nation' initiative, which allows deductions based on actual payments but not exceeding 15,000 baht, there are also special privileges like the first home project and the flood repair project that can further help save on income tax. TerraBKK summarizes the key points of tax deductions from real estate as follows:


1. Mortgage Interest 

           The Revenue Department specifies that the deductible mortgage interest must be paid to banks or other financial institutions, life insurance companies, cooperatives, or employers, for the purpose of purchasing, leasing, or constructing residential buildings, with the property mortgaged as collateral for the loan. You can deduct taxes based on the actual amount paid, but not exceeding 100,000 baht. Therefore, any interest exceeding this limit will not affect the income tax deduction.

  • In the case of joint borrowers with two earners, each can deduct half of the interest paid, with a combined maximum of 100,000 baht. There is no requirement for the interest to be paid for the entire tax year, and there is no limit on the number of properties.
  • In the case of a married couple, if the husband (who has no income) takes out a loan to buy a house alone, the wife (who has income) cannot claim the mortgage interest deduction. Therefore, the right to claim can only be exercised if she is also a co-borrower for this house purchase.
  • In the case of multiple loan agreements secured by the same property, such as loans with different interest rates, they should be considered as a single debt based on the property number. Thus, if one person borrows, they can deduct a maximum of 100,000 baht, or in the case of two joint borrowers, each can deduct up to 50,000 baht.

 


2. Repair Costs for Flood-Damaged Homes  

           Repair costs for flood-damaged homes can also be deducted from taxable income under the government's economic stimulus measures. The property must have been damaged by flooding during two periods: from December 1, 2016, to May 31, 2017, and from July 5, 2017, to December 31, 2017. You can deduct repair costs or materials paid for, up to 100,000 baht based on actual payments, and the property must be located in areas declared by the government as flood zones, such as provinces including Phatthalung, Narathiwat, Yala, Songkhla, Pattani, Trang, Surat Thani, Nakhon Si Thammarat, Chumphon, Ranong, Krabi, and Prachuap Khiri Khan.

  • The types of repairs are divided into three categories: repairing buildings, repairing fixtures attached to the building (e.g., built-in furniture), and repairing property installed in the building (e.g., fences, carports, swimming pools).
  • Documents required for tax deductions do not need to be full tax invoices; payment receipts for repairs or materials showing the payee and payer, date, itemized repairs with amounts, and signatures of the payee are sufficient.

 

 

3. Property Purchase Costs under Economic Stimulus Measures (First Home)  

           This will continue to be effective for another 5 years for those who participated in the economic stimulus measures (First Home) from October 2015 to December 2016. As a result of that initiative, Thai citizens can enjoy tax exemptions averaging the same for 5 consecutive years (20% of the property value, up to 3 million baht). For example, purchasing a townhouse valued at 3 million baht allows for a total tax deduction of 600,000 baht ( = 3,000,000 x 20%), averaging 120,000 baht per year ( = 600,000 / 5 years) over those 5 years.

         

           In conclusion, it is unlikely that anyone would consider buying real estate solely for the purpose of tax deductions on mortgage interest. It is important to view this as assistance for Thai citizens who bear the burden of home loans. Even though the first home project does not occur frequently, TerraBKK believes that "mortgage interest" remains a primary tool for saving on income tax every year. Regarding special measures to assist with flooding, if given a choice, we would prefer to avoid flooding altogether. Additionally, for Thai citizens who donate to help flood victims between July 5, 2017, and October 31, 2017, they can also deduct 1.5 times the donation from taxable income (combined with other donations not exceeding 10% of income after deducting expenses and other deductions). ---- TerraBKK

Article by: TerraBKK Investment Tips

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