Buying a house and its possible renovation are important phases in the life of many families. Often, to finance these operations, mixed mortgages are used, which include both the part dedicated to the purchase of the property and the part intended for renovation work.
However, as indicated in a recent response from the Revenue Agency on FiscoTodaysome aspects related to the deduction of passive interests could create confusion.
This article addresses the topic, starting with a real question posed by a reader, and then delving into the guidance provided by the tax authority.
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The reader’s question
A reader asked:
“I took out a single mortgage to purchase my main residence and renovate it. The contract, however, does not specify the amount of the mortgage intended for the purchase. Can I still take advantage of the interest deduction for the purchase of the property, and for what amount?”
This question is a recurring doubt for those who find themselves in the situation of having to manage a mortgage intended for different purposes. The main concern concerns the possibility of taking advantage of the tax deduction on passive interests, in particular those related to the purchase of the first home.
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The Revenue Agency’s response
In response to this question, the Revenue Agency clarified that, even if the mortgage contract does not specify the amount intended for the purchase of the primary residence, there are solutions to obtain the deduction of passive interests.
The institution explained that, in the absence of a document that clearly distinguishes the different purposes of the loan, it is still possible to avail of a declaration in lieu of a sworn statement. This document, provided for by Article 47 of the Presidential Decree No. 445/2000allows the taxpayer to declare which amount of the mortgage was actually used to purchase the home and which was used for renovation.
Article No. 47
Declarations in lieu of a sworn statement1. The sworn statement concerning states, personal qualities or facts that are directly known to the interested party is replaced by a declaration made and signed by the same in compliance with the procedures set out in Article 38.
2. The declaration made in the declarant’s own interest may also concern states, personal qualities and facts relating to other subjects of which he has direct knowledge.
3. Without prejudice to the exceptions expressly provided for by law, in relations with the public administration and with concessionaires of public services, all states, personal qualities and facts not expressly indicated in Article 46 are proven by the interested party through a declaration in lieu of a sworn statement.
4. Except where the law expressly provides that reporting to the Judicial Police Authority is a necessary prerequisite for activating the administrative procedure for issuing of the duplicate of identification documents or in any case certifying the personal status and qualities of the interested party, the loss of the documents themselves is proven by the person requesting the duplicate by means of a substitute declaration.
It is therefore a self-declaration that allows the citizen to certify facts, states or personal qualities that are not already documented by certificates or official acts. In the case of mixed mortgages, this declaration is used to certify the amount actually allocated to the purchase of the main residence, facilitating access to the deduction of passive interests.
In this way, it will be possible to request the deduction of passive interests for the part of the mortgage used for the purchase of the first home, provided that the other conditions provided by law are met.
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How the interest deduction works
There deduction of passive interests on mortgages for the purchase of the first home is one of the most important tax breaks in Italy. The law provides that the taxpayer can deduct 19% of the passive interests paid, up to a maximum of 4,000 euros per year.
However, this benefit is only applicable to the portion of the mortgage intended for the purchase of the property, not to that relating to renovation or other expenses.
In the case of a mixed mortgage, therefore, it is essential to clearly separate the sums used for the purchase from those used for other purposes, such as renovation work. If the mortgage contract does not report these details, the taxpayer can resort to the substitute declaration, as suggested by the Revenue Agency.
