Czech mortgage tax deduction for under-36s may rise by CZK 50,000

Young Czechs under 36 will be able to deduct more mortgage interest from their tax base: the plan is to raise the limit by another CZK 50,000. Gabriela Krušinová, spokesperson for the Ministry of Finance, told Novinky about the proposal. The initiative comes from Babiš and Schillerová and is meant to be included in an amendment to the pension savings law called Better Pension Savings.

“The measure will apply not only to newly signed mortgages but also, provided the legal conditions are met, to existing ones,” Krušinová explained. The ANO party promised to help young people with their own housing before last year’s elections.

How the deduction works now and what will change

Currently, mortgage interest paid can be deducted from pre-tax income, but no more than CZK 150,000 a year per household. For home loans taken out before 2021, the limit is CZK 300,000. For people under 36, these caps would be raised by a further CZK 50,000.

This does not mean the state will refund the whole amount: it only reduces the base on which tax is calculated. The additional deduction above the current limit would equal half of the interest paid, up to a maximum of CZK 50,000. To get the maximum benefit, you would need to pay at least CZK 100,000 in interest over the year.

Who will be able to use the benefit

The benefit can be claimed for the last time in the year in which a person turns 36. For a joint mortgage, the benefit will be split between both borrowers if both meet the age requirement. If only one of them does, that person can claim the full deduction.

The benefit will apply to only one loan agreement and primarily to a person’s own home. If part of the property is rented out or used for business, the deduction will be reduced.

What it will cost the budget

According to the Ministry of Finance, the change would cost public budgets CZK 800 million a year. The mortgage interest deductions already in place led to forgone revenue of CZK 7.9 billion, according to the latest available data for 2023.

The main aim of the Better Pension Savings amendment is to change the rules for pension savings. MPs Patrik Paržil (ANO) and Vladimír Pikora (Motoristé) also propose clarifying the conditions for alternative funds, which can invest savers’ money in, for example, real estate, startups or private companies. More than half of their assets would have to go into such investments. If the change takes effect as early as 2027, the calculation of the fee that funds receive for managing clients’ money will change as well.

Around Prague guide on the topic: Mortgages in Czechia for foreigners: who can get one and how much of your own money you need

Around Prague, based on reporting by novinky.cz