Property deduction for the construction of a private house is applied on the basis of Art. 220 Tax Code of the Russian Federation. The maximum deduction amount for construction costs is limited and amounts to 2 million rubles. (you can return 13% of the tax on this amount - 260 thousand rubles). A taxpayer can claim a tax refund for one household or for several properties (for example, a house and an apartment), but the total amount of the deduction cannot exceed the legal limit. If credit funds were used for construction, you can also claim a deduction for interest paid to the bank; its maximum amount is 3 million rubles. (you can return up to 390 thousand rubles). When using a deduction, it is necessary to take into account not only the restrictions on the limit, but also the level of taxable income in the tax period for which the benefit is claimed.
Innovations in obtaining deductions during construction
A tax deduction for the construction of a house is compensation for finances transferred to the state treasury during its construction as personal income tax. Such costs are refundable only if the following conditions are met:
- official employment of a citizen;
- availability of earnings from which duty was withheld;
- residence of Russia;
- placement of the building on the territory of the country;
- the premises must be considered residential;
- documentary evidence of costs;
- the deduction had not been applied before.
General approach
At the instigation of the Russian Ministry of Finance, legislators have simplified and accelerated the procedure for obtaining personal income tax deductions. This is Federal Law No. 100-FZ dated April 20, 2021, as amended by the Tax Code of the Russian Federation. For some of them, supporting documents and a visit to the tax office are not required.
For example, the mechanism for receiving deductions valid until May 2021 requires filing a tax return in form 3-NDFL with documents confirming the right to deductions. Only after this a person can return 13% income tax on the amount of the mortgage loan and interest paid.
The simplified procedure involves contactless communication with tax authorities through your personal account on the Federal Tax Service website. Tax authorities will check the right to receive a deduction in this format themselves using an automated information system.
EXAMPLE
Tax deduction when purchasing real estate: if a citizen buys property using banks, the tax office takes data from credit organizations, pre-calculates the deduction and posts it in his personal account. All that remains is to choose which account to transfer the funds to. This applies to deductions for purchases, interest on loans, and investment deductions from IIS.
Employers will begin to receive confirmation of social/property deductions directly from the tax office, and not from the employee.
The new approach reduces the time required for processing and receiving deductions from 4 to one and a half months.
The specified Federal Law of April 20, 2021 No. 100-FZ comes into force on January 1, 2022, but many key norms are already in place from May 2021.
When is it possible to exercise a privilege?
Property deductions for building a house can actually be used in various situations:
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- Constructing the building yourself. The housing structure must be listed in such a way that it is possible to register in it. If you do not have the right to register in such a premises, you will not receive privileges.
- Acquisition of an unfinished building and its completion. According to documentation of this kind, the house should be classified as an unfinished construction project. Otherwise, you will be able to return the money spent only on the purchase of square meters, but not on completing the construction process and repairs.
Subjects
When constructing a building on your own on a plot of land for private housing construction, tax refunds are realized by the following entities:
- owners of the house or plot on which it is located;
- one of the spouses of the owner of the school or house;
- parents of the minor owner of the property.
When is refusal possible?
The regulations provide for cases when a deduction will not be received during the construction of a private house. Thus, applicants will not see compensation payments when:
- the expenses were incurred not by the applicant, but by another person;
- maternity capital or other assistance from the state was used for the construction of the building;
- An agreement has been concluded with an interdependent party.
Simplified receipt of property and investment deductions
What to follow
A simplified procedure for obtaining investment and property tax deductions (for the purchase of housing, payment of interest on a mortgage and the amount of money deposited into IIS) from May 20 (21), 2021, is regulated by a new article. 221.1 Tax Code of the Russian Federation. As for social deductions for training, treatment and voluntary insurance, the rules about them have simply been clarified.
The new procedure applies to deductions, the right to which arose for an individual from January 1, 2020 . That is, the norms of Art. 221.1 of the Tax Code of the Russian Federation have retroactive effect (Federal Law dated April 20, 2021 No. 100-FZ).
Statement
To receive deductions in a simplified manner, you need to submit an application.
The filing deadline is at the end of the tax period (calendar year), no more than 3 years preceding the year of filing the application.
The condition for providing deductions in a simplified manner is that the tax authority has information about the income of an individual and the amounts of tax calculated, withheld and transferred by the tax agent to the budget. These are calculations in Form 6-NDFL and income and tax certificates submitted by the employer(s) for the relevant periods.
To receive a deduction for depositing money into an IIS, the tax authority must have information confirming that the payer has transferred funds to this account. They are reported by the tax agent.
In the application for a refund, you must indicate the details of a bank account opened by an individual (not to be confused with the number on a bank card).
The application is filled out and sent through the taxpayer’s personal account in the format approved by the Federal Tax Service of Russia.
The very possibility of receiving a deduction in a simplified manner will be indicated by an automatically pre-filled application for deduction in your personal account on the Federal Tax Service website, generated based on the results of a 20-day verification of information received from the bank. There you can also track the process of receiving the deduction - from the moment you sign the pre-filled application until your personal income tax is returned.
Thus, before the pre-filled application appears in your personal account, no action is required from the taxpayer.
Please note that a new approach has been in effect since 2021: the right to a property deduction arises from the moment of state registration of ownership, and not from the moment of receipt of a document (certificate) for the object.
As a general rule, other documents are not needed to obtain property and investment deductions in a simplified manner. As part of the exchange of information, the tax office receives the necessary and up-to-date information from tax agents, banks, and Rosreestr. The list of participating banks will be updated in a special section on the Federal Tax Service website.
Application processing time
First, the tax authority, based on available information, places data in your personal account (PA) for automatically filling out an application or sends a message through it about the impossibility of obtaining a tax deduction in a simplified manner, indicating the reasons within the following time frame:
- no later than March 20 of the year following the expired tax period - in relation to information submitted by the tax agent or bank before March 1;
- within 20 working days after the day of submission of information - in relation to information submitted by a tax agent or bank after March 1 of the year following the expired tax period.
A desk audit of an application is an analysis by tax authorities of compliance with the requirements of Art. 221.1 of the Tax Code of the Russian Federation and other conditions for obtaining tax deductions. As a general rule, it lasts 30 calendar days from the date of filing the application.
The period for checking an application for deductions can be extended to 3 months if, before its completion, the tax authority establishes signs indicating a possible violation of tax laws. Such a decision will be reflected in your personal account within 3 days from the date of adoption.
If an application (several applications) and a 3-NDFL declaration are submitted simultaneously for one tax period, a desk audit in relation to each document begins from the date of registration according to the order in which they are sent to the tax authority.
Decision on the application
| IF NO VIOLATIONS | THERE ARE VIOLATIONS |
| The tax authority makes a decision on granting a tax deduction within 3 days after the end of the audit. | The tax office makes one of the decisions under Art. 101 Tax Code of the Russian Federation:
And also one of the solutions:
|
The law does not provide for the opportunity to provide explanations or make appropriate corrections to the deduction application.
The remainder of the property deduction can be used in a simplified manner.
Return of deduction
If there is arrears of personal income tax, other taxes, arrears of penalties and/or fines, the tax authority independently offsets the amount of tax to be refunded in connection with the provision of a tax deduction. The deadline for making such a decision is 2 days after the day the decision was made to grant the deduction in whole or in part.
sends it to the territorial body of the Federal Treasury within 10 days He, in turn, makes a refund within 5 days .
KEEP IN MIND
If the deadline for returning the deduction is violated, from the 16th day after the decision to provide it is made, interest is accrued at the Central Bank refinancing rate that was current on the days the return deadline was violated.
Cancellation of the deduction decision
A tax agent or bank can provide updated information leading to a reduction in the amount of tax returned to an individual in connection with the provision of a deduction. Then the Federal Tax Service within 5 days makes a decision to cancel in whole or in part the decision to provide a deduction in whole or in part.
Within 3 days, such a decision with the amount of tax and/or interest to be refunded by the individual is posted in your personal account.
The excess received as part of the deduction must be reimbursed to the budget within 30 calendar days from the date of sending the specified decision through your personal account.
KEEP IN MIND
Interest is charged on amounts that an individual must repay at the Central Bank refinancing rate during the period of using budget funds. This occurs from the date of receipt of money in the account or the date of the decision to offset until the date of the decision to cancel the deduction.
In case of non-payment or incomplete payment within 30 calendar days , a request for payment of tax and/or interest will be sent to your personal account within 20 days If you ignore it, the tax office will launch a collection procedure under Art. 48 Tax Code of the Russian Federation.
If the taxpayer’s access to his personal account is terminated, the Federal Tax Service will send documents by registered mail.
Expenses taken into account
An income tax refund may exist when the following construction costs are present:
- allotment for housing construction;
- unfinished construction site;
- construction and finishing raw materials;
- services and works of builders;
- design and estimate materials, supplying utility networks to the premises.
It is worth remembering with everything that all financial losses will need to be documented, so you will need to save all checks, receipts, invoices, etc.
What expenses are included?
When constructing a living space, a citizen of the Russian Federation can receive a property tax deduction for the construction of a house for expenses associated with the following costs for the construction (completion) of housing:
- official registration in accordance with the established regulations of the appropriate package of documents, which indicate the project plan, the purpose of the designed object (through the services of a notary and authorized bodies);
- purchase of consumables, as well as other materials necessary for both external and internal finishing (the costs are fully compensated);
- payment for professional services of a construction team, electricians, gas workers, specialists in installing sewer systems of a private home and other workers.
For what types of work and for the purchase of what types of materials can you not receive compensation when constructing private housing?
An approximate list of repair and construction work for which a citizen cannot claim state compensation in the form of a tax deduction includes the following:
- development, installation, repair or dismantling of unheated non-residential indoor premises adjacent to a private residential area, intended for storing equipment or keeping livestock;
- construction of a fencing structure separating a private construction zone (or already constructed housing) from the external territory.
You cannot receive compensation for the purchase of the following types of materials and services necessary for the construction of a private residential building (sample list):
- purchase and installation of an air conditioning system;
- installation of heated floors;
- purchase of equipment for Internet provision and its subsequent installation;
- purchase of plumbing materials, including toilets, equipment for heating water, special meters for cold and hot tap water and some others;
- purchase of telecommunications services, cable television;
- production of materials for sound insulation and its subsequent installation;
- development, preparation, calculation of individual parameters and installation of PVC windows;
- glazing services for balconies, loggias, etc.
To understand how to obtain a tax deduction when building a house, you need to refer to the current legislative acts that stipulate the rules for performing this legal procedure.
The algorithm for carrying out actions in relation to obtaining a deduction includes the following steps:
- confirmation of the right to receive compensation by providing the authorized bodies with appropriate documents indicating that the property is registered in the name of a citizen claiming a property deduction for the construction of a house (or its completion);
- collection of the necessary official certificates and extracts confirming the mandatory registration of residential space in the Unified State Register of Real Estate, provided for by the current law of the Russian Federation;
- applying one year after submitting all the necessary documentation to representatives of the tax authority of the Russian Federation at the place of residence to receive the required compensation for the house (for its construction or completion).
Let's look at the detailed list of required documents.
Documentation
Appropriate execution of the procedure, providing for tax deductions for the construction of a residential building (or its completion), requires a citizen of the country to have the following documents:
- a copy of documents confirming the citizen’s identity (passport, driver’s license, etc.);
- a certificate issued by an authorized employee of the Unified State Register of Real Estate, certifying the legal registration of residential space;
- a certificate serving as confirmation that a citizen has paid the mandatory state income tax in full (form 2-NDFL);
- originals of extracts and documents serving as confirmation of existing expenses for the construction of private housing, its decoration and repairs (in some cases, copies of these documents are acceptable);
- a taxpayer’s statement certified by the authorized bodies on accrued income, as well as on all available objects of taxation (form 3-NDFL);
- originals or copies of sales receipts, contracts, bank accounts and other payment documents confirming the transfer of funds as payment for any professional services that the citizen used during the construction of private housing;
- an official application for tax compensation, received and certified by a notary.
Is tax interest deductible if the costs of housing construction are fixed after issuing a certificate from the Unified State Register of Real Estate
When housing construction costs are recorded after an official certificate is issued in the Unified State Register of Real Estate, representatives of state tax authorities are also obliged to compensate them.
In this case, the procedure is carried out on the basis of the regulations for property deduction, taking into account the current amount of expenses for the construction of residential space.
Calculation of compensation amount
A citizen of the Russian Federation has the right to demand from authorized state bodies monetary compensation equal to the amount of income tax. That is, up to 13% of the funds are returned from the total cost of construction, repair and improvement of private housing, according to established standards.
In this case, the spouse of a citizen applying for compensation has the right to demand a deduction on the basis of owning their own share in the constructed housing.
But in this deduction algorithm there is a total limit. The maximum allowable amount of compensation deduction per year is 2 million rubles.
If the residential space was built within the framework of the current mortgage system, then in this case the limit when deducting tax interest is completely canceled.
Expenses that are not taken into account when calculating benefits
A personal income tax refund is not possible from money for:
- redevelopment or reconstruction of the building;
- restoration of an existing building;
- installation of plumbing, gas or other equipment, sound insulation, heated floors, etc.;
- construction of auxiliary facilities (shed, garage, fence, bathhouse, etc.).
Privilege volumes
The amount of deduction for building a house is determined like other types of similar benefits. So you have the right to return up to 13% of expenses, however, such an amount should not exceed the deduction from 2 million rubles, i.e. 260 thousand rubles. The amount refunded cannot in any way exceed the amount spent.
Calculation features
When determining a home benefit, it is taken into account that if the amount of expenses incurred is less than the maximum established amount for which a deduction is allowed (2 million rubles), then the amount of the benefit will be 13% of the actual expenses.
For example, a citizen spent 1,800,300 rubles when building his own home. Since the expenses did not exceed the limits established by the regulations, the amount returned to him will be 234,039 rubles. (1,800,300×13%).
Deduction amount
Since the deduction for the purchase of land is not a separate type of deduction, its size is regulated by the standard deduction rates for the purchase of housing. Read more in the article “Tax deduction amount”.
The total amount of the deduction, including expenses for the purchase of land, purchase or construction of a house, cannot exceed 2 million rubles (260 thousand rubles to be refunded).
Example: Korolev A.A. bought a plot of land for 3 million rubles and built a house on it for 5 million rubles. Despite the fact that the total expenses for purchasing land and building a house amounted to 8 million rubles, Korolev will be able to deduct only 2 million rubles and return 260 thousand rubles.
How to get a tax deduction when building a house: required documentation
If a citizen independently built his own home, he has the right to return 13 percent of the amount spent, which went to pay tax.
For this purpose, you will need to prepare a certain list of documents, since the benefit itself does not count. Thus, documents collected during the construction of a house are submitted to the tax office. Their list is as follows:
- certificate form 2-NDFL;
- declaration 3-NDFL;
- application;
- passport;
- certificate from the Unified State Register of Real Estate;
- title papers;
- marriage certificate (if necessary);
- statement on the distribution of funds received;
- birth certificate (when the square meters are recorded on the child).
In addition, if everything was done through a mortgage, then the inspector will need to prepare:
- mortgage agreement;
- certificate from the bank;
- documentation certifying interest repayment.
In what cases are you entitled to a deduction?
1. You purchased a plot of land and built a residential building on it
We are talking specifically about a residential building, and not about a residential building. The Letter of the Federal Tax Service of the Russian Federation dated 02/15/2018 N GD-4-11/ [email protected] “On the procedure for applying the property tax deduction for personal income tax” and the Letter of the Ministry of Finance of Russia dated 02/08/2018 N 03-04-07/7700 states :
“In accordance with the current legislation of the Russian Federation, the terms “residential building” and “residential building” are not identical.”
Thus, from paragraphs. 3 and 4 clauses 1 art. 220 of the Tax Code of the Russian Federation follows:
“...there are no grounds for applying property tax deductions provided for in Article 220 of the Code during the construction or acquisition of a residential building that is not recognized as a residential building.”
It should be taken into account that, according to Letter of the Ministry of Finance of Russia No. 03-04-05/27085 dated 05/03/2017:
“If a residential building is recognized as a residential building, a property tax deduction, the taxpayer has the right to receive the specified tax deductions provided for in subparagraphs 3 and 4 of paragraph 1 of Article 220 of the Code, taking into account the established requirements.”
So, one thing is important for us - you can return the tax if you built a residential building with the right to register in it, registered it with Rosreestr and received an extract about it.
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Example:
In 2021, you bought a plot of land for personal subsidiary plots (personal subsidiary plot) and built a house on it. According to the documents, it is registered as a residential building without the right of registration. In this case, you are not entitled to a tax deduction. But if the house is recognized as a residential building with the right to register in it, you can receive a property tax deduction for it.
2. You bought a house under construction and completed it
Attention! If you plan to receive a refund not only for the purchase of the house, but also for its construction, carefully draw up the purchase and sale agreement. It must indicate that you are purchasing an unfinished construction project.
Example:
In a cottage village, a plot of land with an unfinished house was for sale. You have correctly drawn up the purchase and sale agreement and stated that you are buying an unfinished construction project.
After you finish building the house and receive an extract from the Unified State Register of Property Rights, you can submit documents to the tax office. The deduction will include both the costs of purchasing an unfinished house and construction costs.
Example:
You found a house you liked and rebuilt it as you saw fit: you carried out various types of reconstruction, expansion and improvement. Since you purchased a finished house and not an unfinished construction project, you will not be able to include construction costs in your tax deduction.
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Repair work
Speaking about how long it takes to receive deductions, it is worth noting that repair work often continues even after the property has been registered as property. In this regard, many are interested in whether it is possible to return funds for finishing. The government expressed the view on this matter that such expenses can be included in expenses from which deductions can be obtained in the future.
