Section 26E of Inland
Revenue Ordinance states that the interest paid on loan for purchase of
residence is tax deductible. In brief, the qualifying conditions are:-
the person is the
property owner; and
property is a rateable unit in Hong Kong; and
property is used as the person's residence; and
is subject to mortgage from a recognized lender such as bank.
The interest on loan for purchase
of a car park space in the same development of the home is also
deductible. It is added to the interest on the loan for the purchase of
the home for the purpose of interest deduction.
There is a limit on the
interest deduction. The current limit is $100,000. If the deduction is
below the limit, the unused part cannot be carried forward.
A person can only get the
deduction for a total of 10 years of assessments. It is up to him to
apply for the deduction for any year of assessment throughout his
Where the property is
partly owned by the person, the interest deductible is restricted to his
share of ownership.
Where the property is
jointly owned by the person and his spouse, the deduction ratio of
interest is 50%. But if the spouse has no income chargeable to tax, he
can get the remaining 50% deduction by spouse's nomination. If the
spouse has income chargeable to tax, no nomination is allowed but that
spouse can get her share of the deduction in her own assessment. If the
couple elects for joint assessment, then the total interest will be
allowed in their joint assessment.
Where a re-mortgage loan is borrowed
to repay the first loan, the interest on the re-mortgage loan
attributable to the repayment of the first loan is deductible.
Where an additional loan
is borrowed after the purchase of the property, the interest on the
additional loan is not deductible.
claim the deduction in his tax return. If he forgets to do so, he
may claim it by an objection when he
receives the assessment. Even if he misses the objection deadline, he
can still claim it by a Section 70A claim
(because it is an omission --- to claim the deduction).
A taxpayer may revoke his claim for home loan
interest within 6 months of the assessment granting the deduction.
The revocation is usually made by the taxpayer who has not fully
utilized the maximum deduction and
hopes that he can get greater tax reduction in future.
The granting of home loan interest is based on
the registered legal interest of the property. That means it is
granted to the owner as registered in the Land Registry. The IRD
does not accept apportionment of the interest based on the
contributions towards the purchase and installment repayment of the
property. In other words, if the property is jointly owned by the
taxpayer with his parent, only 50% of the interest payments will be
allowed even though the taxpayer pays all the purchase price and
The IRD does not accept "trust" and "beneficial
owner" claim either. If the taxpayer is not a registered owner with
the Land Registry, he will not get the deduction even if he is a
beneficial owner under the law of equity.