Property deduction when building a house: documents, explanations

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Do you know that the cost of building a house can be reduced and done on the basis of the law? In the Tax Code of the Russian Federation, such a support measure as a property deduction is intended for working citizens. When building a house and finishing it, the state will return part of the funds, you just need to provide a package of documents to your tax agent.

What is a tax deduction

Tax deduction is the part of the tax that is returned to the taxpayer. The Tax Code of the Russian Federation provides for property tax deductions for the construction of a residential building. Thus, the state seeks to stimulate the construction of new houses, and make ready-made houses and apartments more affordable.

Who can expect to receive a deduction

All working citizens of the Russian Federation, whose income tax is 13%, are en titled to receive a property deduction for building a house. The main thing is that they have Russian citizenship and pay taxes to the treasury, i.e. worked officially in Russia.

They are en titled to a refund equal to the full rate of income tax when purchasing a plot of IZHS, to pay for development work, andalso for the cost of purchasing building materials.

What are the conditions for its provision

The conditions for granting a tax deduction for the construction of a new house are spelled out in article 220 of the Tax Code of the Russian Federation. According to the law, it is provided to a citizen on:

• expenses for developing a house project;
• expenses for the purchase of building materials;
• expenses for paying construction workers, architects and other professionals involved in construction;
• utility connection costs.

Deductions are only available for the above expenses. Any others that do not fit this description will not be granted. You will not be able to receive a deduction for a purchased concrete mixer or drill, as they do not fall into any of the above categories.

What documents are needed to obtain

In order to exercise your right, you must collect a set of documents confirming your identity and right. Below are the documents for the property deduction for building a house that the tax agent will require from you:

• photocopy of passport;
• TIN;
• application for a deduction for the construction of a house (this information should be indicated in the document);
• income certificate;
• income declaration;
• document confirming the ownership of the plot;
• copy of land certificate;
• copy of the building contract;
• checks, receipts, any documents confirming the amount of construction costs.

If you have minor children in your family, you must also provide a birth certificate for each child. If you have at least one foster child, you will be required to provide a decision from the guardianship authorities that the child is in your care.

Money is not returned in cash or to a personal bank account. They are issued together with wages at the place of work at the cash desk or on a working bank card. At the same time, if you work 2-3 jobs at once, you have the right to receive it from all places of work. In this case, copies of documents should be provided to all employers acting as a withholding agent.

Under the law, you may choose not to file an income tax return. However, this document contains information that will take some time for the tax authorities to obtain. To speed up the process of considering the application, it is better to fill out and submit the declaration.

Deduction amounts

The amount of the deduction depends on the amount spent on the purchase of building materials, wages for workers, and so on. In accordance with the law, you are en titled to a property deduction in the amount of up to 2 million rubles. However, if housing is being built not for living in it, but for sale, then the amount will be no more than 250 thousand rubles, provided that the value of real estate is less than 1 million rubles. At the same time, one should take into accounttime factor. The maximum amount of the property deduction for the construction of a house is equal to the amount that was provided for in the month when the balance was formed, carried forward to the following periods.

Property deduction is not provided if the housing was purchased or built with maternity capital or employer funds. It is also not available to non-working pensioners, since the pension is not taxed, which means there is nothing to deduct from.

Can I get a deduction for unfinished housing

It often happens that not just a plot or a plan of a house is purchased, but an already rebuilt or almost rebuilt building. For example, a land plot has been purchased on which a foundation and a basement have already been erected. Is it possible in this case to count on receiving a deduction for an unfinished house? The law states that you can get it not only for the purchase of a plot, but also for an unfinished house, and even for finishing it (if the house is built, but there is no finishing in it).

On the funds that the previous owner spent on the construction of a private house, of course, you will not be able to receive a deduction. You will also have to document that you received an unfinished house. That is, it makes sense to register all those buildings and document what was actually done before the previous owner purchased the house. This must be done immediately after the purchase, so that later there will be no misunderstandings when determining the amount of the tax deduction for the construction of a new home.

To receive a deduction for an unfinished building, you mustin addition to those documents that are handed over when building a house from scratch, provide an act of acceptance and transfer of unfinished housing. This is true even if you have acquired a stake in it.

To receive a property deduction for the construction of a house, you should contact your employer. If you work for a large enterprise and you do not have direct access to the manager, the application must be submitted to the human resources department. In the event that it is not possible to contact the employer, the application and the package of documents can be submitted at the nearest tax office.

Can I get the deduction again

The law does not provide for the receipt of a tax deduction again. Even if you buy another home or change jobs, you can't count on the deduction for building a house a second time.

Every citizen has the right to receive a property deduction for building a house. The law allows you to use the tax deduction for building a house, for example, another spouse, adults, working children and other family members, but only with their permission.

Is it possible to get a deductible balance

It happens that during the construction of a private house, not the entire amount of the deduction provided by law was spent. For example, when building a house, you were able to reimburse an amount of less than 2 million rubles. Then you or someone from your family decided to build another house. Can the remaining funds be used? If you are not engaged in the construction of houses exclusively intended for their subsequent sale, then you can, but only withinthe remaining amount and subject to the conditions prescribed in Article 220 of the Tax Code of the Russian Federation.

How the deduction is calculated for equity participation in an apartment building

Tax property deductions for construction and finishing can be provided if the taxpayer has a certificate confirming the ownership of the purchased housing. It must be submitted along with the application. Moreover, you can get it not only from the purchased building materials, but also from the interest on the loan, if a residential building was erected for the amount received.

When participating in shared construction, you will be able to receive it only after the house is put into operation, since only after that a certificate will be issued. Until you have this document, you will not be able to receive a property tax deduction for shared construction. A certificate of ownership is included in the mandatory package of documents, given that not everything is clean with construction companies in Russia. If the specified construction period in the contract is more than 3 years, you will not be able to receive a deduction.

Payouts

As soon as it becomes possible to receive a property deduction during construction, it is necessary to submit a pre-prepared package of documents to the employer or to the tax department. Within 3 months, the tax service will check the documents, and if there are no reasons for refusal, the deduction will be credited and issued along with the salary.

If within 3 monthsthe decision was not made, the taxpayer has the right to demand from the tax service the transfer of interest in the amount of the current refinancing rate.

In case of refusal to calculate the deduction due to an incorrectly executed package of documents (there are no certificates, the wrong data are indicated), the request can be made again.

The decision to refuse or issue the tax authorities send by mail to the place of residence of the taxpayer. At the same time, they must indicate the reason for the refusal to issue a property tax deduction. They are obliged to send explanations in writing to you by mail at the address of residence

Possible problems

Problems may arise when returning funds, which will lead to the fact that you will lose the opportunity to receive a property deduction:

• Due to the length of construction work. In order to receive a deduction, you must provide an acceptance certificate. If for some reason the construction is delayed for more than 3 years, it will no longer be possible to get it.
• Delay in the execution of documents confirming ownership. Most often, participants in shared construction face this problem when the construction company cannot put the house into operation within the time specified in the contract or does not complete the construction at all.
• Occurrence of disputable situations during the verification of documentation by the tax authorities. Officials may require additional information or confirmation of the legality of transactions. Sometimes they don't give reasonsrefusal, which is against the law.
• Unscrupulous developers. This is one of the most common reasons why tax deductions are not granted. In their desire to earn as much as possible, they often arrange forgery of documents, delay the delivery of the object, indicate other prices in the documents.

If the above problems occur, you should go to court. This is the only way to get the funds that are rightfully due to you and resolve the controversial situation, or at least punish those responsible for the fact that you cannot exercise your right.

Instead of a conclusion

Tax property deductions for building a house are a legal right to reimburse, if not all of the funds spent, then at least some of them. Building a residential building is expensive. If there is an opportunity to save money through tax deductions, it would be irrational not to use it.