When you take out a loan as a self-employed person for the purchase or construction of a home, which you also want to use partly for the exercise of your profession, this has fiscal consequences. Your home loan is then split into a residential part and a part for professional purposes.
Borrowing as a self-employed person
Anyone who has previously taken out a home loan as a self-employed person will agree: usually things are a bit more complex than with ‘ordinary’ salaried employees. And that starts as soon as you apply for a credit.
Firstly, wage earners can demonstrate quite simply that they have a fixed monthly income. It is therefore also easier for the bank to determine whether and how the loan is repaid. That is another matter for self-employed people, who usually have a variable and sometimes uncertain income. How does the bank handle this? By basing on your income from the last two or three years and extrapolating an average monthly income from there.
And starting self-employed persons?
Are self-employed persons who have only just started to lose money, because they cannot yet provide an income statement of two years or more? Not necessary, but it is better to estimate carefully and start from a minimal income. You can also make your partner’s income weigh more heavily if he or she has a fixed income.
For the division of your home, the effective surface area you need for the exercise of your profession versus the residential part is examined. This is necessary for the breakdown of the financing, but also for the breakdown of the tax benefits afterwards. After all, you can include the costs you incur for the equipment and maintenance of the professional part of your home as a professional expense in your tax return.
If you borrow the full amount of your home, the split of the loan will take place in the same proportion as that for the split of the professional and private parts of the house. If you also bring in your own funds, you should ask yourself whether you put them in the professional section or in the private section of your home. The tax benefits may again differ for both parts.
In Good Finance, you are entitled to a housing bonus of 1,520 USD for the repayments of capital, the interest on your home loan and the payment of the premiums for the outstanding balance insurance. During the first ten years of the loan, 760 USD will be added if it is your only home. If you have at least three children, another 80 USD. That brings the maximum to 2,360 USD per person. The housing bonus ultimately entitles you to a tax reduction of 40%. Whoever fills his basket to the maximum, saves 944 USD per person.
The situation is different for the investment credit: there you may deduct all interest paid for tax purposes as professional expenses. In addition, they provide you with tax savings at the highest rate that your income falls in, bringing the benefit up to 50%.
Just because you can tax more professional interests at a higher rate, it may be more interesting to borrow mainly for the professional part of your home and to keep the personal contribution for the private part. The tax authorities explicitly accept that you do this. It is of course best to concretise that precise calculation exercise together with your banker and your tax specialist.