Under what conditions is a tax deduction allowed for repairs and decoration of a private house?

Who is entitled to a deduction for finishing an apartment and when?

Tax deduction for finishing expenses refers to property deductions. It can be obtained on the basis of paragraphs. 4 p. 3 art. 220 of the Tax Code of the Russian Federation along with a deduction for the purchase of real estate. The most important condition is to have an official income and regularly pay the 13% personal income tax.

To receive a deduction for finishing, special conditions must be met:

• the property was purchased at the development stage;
• the object is housing (house, apartment, room or share);
• There is no finishing when purchasing.

In paragraphs 5 paragraph 3 art. 220 of the Tax Code of the Russian Federation there is a direct indication that a deduction for finishing is possible only for “unfinished construction” real estate. Even if you buy housing from a developer, but in a finished house, the tax office will refuse a deduction for finishing costs.

When buying an apartment, you cannot get a tax deduction - none at all, and not just for finishing. This is a special format of real estate, which is legally considered non-residential premises. Property deductions do not apply to apartments.

If you intend to receive a tax deduction, make sure that the contract with the developer stipulates the absence of finishing. The tax office clearly distinguishes between the concepts of “finishing” and “repair”, so be careful with the wording, otherwise you may get a refusal.

Tax deduction for renovation of apartments secondary housing

The Tax Code of the Russian Federation, namely in subparagraph 3, paragraph 2, article 220, defines those cases in which a personal income tax refund is due.

Thus, according to the law, compensation is due in the following cases:

• When purchasing and finishing an apartment in a new building.
• When it is indicated in the contract that the housing is unfinished or has partial finishing.

The possibility of obtaining a tax deduction when purchasing housing on the secondary market is not provided for by law.
Legal practice states that it is impossible to receive compensation for repairs of such housing on the basis of a refusal by the Federal Tax Service. Explanations on this matter are contained in the letter of the Ministry of Finance of Russia No. 03-04-05/9-28, also in No. AS-4-11/14910. At the moment, this provision is in effect and legislators do not plan to make changes to it.

How much can I get back?

The deduction for finishing is included in the general property deduction of 13% when purchasing an apartment, the maximum amount of which is 260 thousand rubles. This amount includes both the return of the cost of housing and the money spent on finishing. The amount of expenses for both together should not exceed 2 million rubles.

Example

The apartment was purchased for 1.6 million rubles; 400 thousand rubles were spent on finishing. The total was 2 million rubles. The tax deduction will be 13% of these expenses - 260 thousand rubles. If the finishing cost 600 thousand rubles, the total amount of deductible expenses would still remain the same - 2 million rubles, as well as the amount of the deduction - 260 thousand rubles.

When apartment buyers are married and receive official income, each spouse has the right to a tax deduction of 2 million rubles, for a total of 4 million rubles. This feature can be used to increase the amount of your deduction.

Example

The apartment was bought by a married couple for 3.2 million rubles. We spent 800 thousand rubles on materials and finishing work. Each spouse has the right to apply for a deduction of 50% of the costs of purchasing housing (1.6 million rubles) and the costs of finishing (400 thousand rubles) - a total of 4 million rubles. The 13% tax deduction in this case will be 520 thousand rubles.

Amount of tax deduction for repairs

Let’s now figure out how much money can be returned for completing construction work (or repairs).

Since the costs of completing construction are included in the list of general costs for real estate, the remainder of the tax deduction available for the purchase of finished or unfinished residential properties, land plots for individual housing construction* or plots with a residential building (finished or unfinished) is usually left to cover them.

The first half of the deduction is usually spent on the purchase of a land plot or an incompletely completed property. If the object is completed, the question of a tax deduction for apartment renovations is removed by itself.

But there is the possibility of receiving and deducting the full amount for repairs: in the event that the owner does not exercise the right to it at the stage of purchasing a home.

Maximum amount of property deduction

A property deduction for the purchase of real estate is a refund of personal income tax paid by taxpayers from the amount of actual expenses associated with the total costs of acquiring real estate, not exceeding 2 million rubles. The maximum refund amount will thus be 13% of 2 million, that is, 260 thousand rubles.

• If the deduction amount is not completely spent, it can be used for similar expenses in the future (including for finishing the premises).
• A taxpayer can receive his 2 million tax deduction only once.

This can be understood with examples.

Tax refund for apartment renovation using examples

For an apartment in a house under construction, the shareholder paid 1,200,000 rubles. The property deduction for the purchase will be 13% x 1,200,000 = 156,000 rubles. However, the deduction amount was not fully spent, and another 800,000 rubles remained.

This balance, but no more, can be spent on repairs:

• for example, 1,500,000 rubles were spent on repairs, which is more than the remainder of the deduction;
• tax refund for renovation of an apartment in a new building will be 13% x 800,000 = 104,000 rubles.

Repair deduction for spouses

Let’s use the data from the previous example and calculate what the deduction for repairs will be for a married couple. If the apartment is in common joint ownership, each spouse has the right to receive a full property deduction of 2 million, that is, 4 million rubles. per family. And then there will be not 800 thousand left for repairs, but 2,800,000 (1,400,000 for each spouse), and the tax refund in total for both will be equal to 364,000 rubles. But this is not the limit.

How to properly account for finishing costs

Not all repair costs are accepted as a property deduction for finishing, but only those specified in paragraphs. 4 p. 3 art. 220 of the Tax Code of the Russian Federation. For the rest, a tax refund will not be issued.

The problem is that the tax code does not have an exact list of materials and work related to finishing an apartment. It is best to focus on section 43.3 “Construction finishing works” of the General Classifier of Types of Economic Activities (OKVED).

Section 43.3 of OKVED specifies the following works:

• polishing;
• plastering and painting works;
• covering floors and walls (tiles, parquet, carpet, wallpaper, etc.);
• scraping of floors;
• finishing carpentry work;
• soundproofing works;
• cleaning of the external area;
• installation of doors, windows, door and window frames.

A deduction can be issued for the costs of installing prefabricated kitchen units, as well as cabinets and stairs. There is no information about other pieces of furniture in the classifier, so, most likely, the tax office will refuse to take them into account.

How to confirm expenses

The tax office will require documentary evidence of finishing costs, so during the renovation process you need to carefully record all costs of materials and work. The following can be presented as evidence:

• sales and cash receipts (paper and electronic);
• contracts and estimates;
• Bank statements;
• payments and receipts.

The costs of the services of craftsmen will be taken into account when drawing up an official contract for finishing work - preferably with a detailed estimate. As a last resort, you can issue a receipt. Work under an oral agreement without confirmation of payment will not be included in the tax deduction.

The documents must contain the details of construction organizations and individual entrepreneurs, stamps and signatures. If the contract is concluded with an individual, it is necessary to indicate his passport details.

When drawing up estimates and other documents that indicate finishing work, you must definitely check section 43.3 of OKVED - the names must match. The tax office can find fault with even such a trifle and deny a deduction for finishing.

List of documents for obtaining a tax deduction

• certificate 3-NDFL. This certificate indicates all income and expenses of the taxpayer. This certificate is updated annually (original);
• certificate 2-NDFL - from the place of work, signed by the manager and certified by the seal of the organization (original);
• certified copies of title documents - certificate of state registration of rights, agreement of shared participation in construction, deed of transfer.

We remind you that these documents must indicate the fact of transfer of the apartment without interior decoration;

• original documents confirming expenses (checks, invoices, invoices, contracts);
• application for a tax deduction indicating the account number to which the money must be transferred.
• the applicant’s passport (original and copy for verification. A copy is attached to the application. The passport remains with the owner).
• If there are minor citizens among the owners, it is necessary to provide originals and copies (or certified copies) of the children’s birth certificates with a document confirming Russian citizenship.

Tax officers are given about 90 days to review your documents. If everything is completed correctly, the required amount will be credited to the applicant’s account within a month.

How to apply for a deduction for finishing

We have already written articles about how to get a deduction when buying an apartment and when paying mortgage interest. Now let's talk about how to return 13% of the cost of finishing a home - the cost of materials and work.

The deduction for finishing is issued together with the property deduction when purchasing a home. The same rules apply - you need to contact the tax authorities at your place of residence directly, at the MFC or online through the “Personal Taxpayer Account”.

Documents confirming the right to deduction:

• agreement on the purchase of real estate (in this case it is a DDU);
• Act of Handover;
• payment documents (including confirmation of finishing costs);
• an extract from the Unified State Register of Real Estate (we wrote about it in detail in another article);
• certificate 2-NDFL (issued at work in the accounting department).

You can submit an application in two ways - through your employer or directly to the tax office by filling out the 3-NDFL declaration yourself. Let's figure out which option to ultimately choose in a given situation.

Who can exercise the right to deduction?

Not all citizens can take advantage of the right to deduction. So, based on the fact that compensation is a refund of part of the personal income tax, only persons who paid the tax can count on it.

The income from which personal income tax is withheld includes not only official earnings, but also those funds received from the rental of real estate, business activities and royalties. In this case, the amount of deductions is 13%.

Not only a citizen of the Russian Federation, but also a resident of the country can resort to deductions.
This category includes persons who are legally present in Russia for more than 183 days and receive income classified as official. As a general rule, a partial refund is due only for finishing work in your own home. In this case, the owner of real estate must submit an application to the tax authorities in person. However, the law also provides exceptions to this rule . Thus, a deduction can be issued for immediate relatives (wife, children).

Registration of deductions through the employer

The method is suitable for those who have a high income and want to start returning personal income tax immediately for the current year. In this case, the employer stops transferring 13% of the employee’s salary to the tax office and pays it taking into account this increase. If the income is high, then the deduction will also be appropriate.

What you need to do to apply for a deduction through your employer:

1. Collect documents confirming the right to deduction.
2. Receive notification of the right to receive a property tax deduction. This can be done in three ways - in person at the tax office through an application, at the MFC or online (section “Life situations” / “Request a certificate and other documents”). The document must be issued within 30 calendar days.
3. Submit a notification to the employer’s accounting department with an application for a tax deduction.

As soon as they receive a notice from the tax office at work, they will begin adding a deduction to your salary every month. This document is valid for one calendar year (namely a calendar year, not a year from the date of receipt), after which it will need to be issued again.

Self-filing of 3-NDFL declaration

When applying for a property deduction through the tax office, you can return personal income tax for the previous 3 years inclusive. For example, in 2020 you can receive a deduction for taxes calculated in 2021, 2021 and 2017. This is convenient for average and low salaries.

How to file a property deduction with the tax office:

1. Collect documents confirming the right to deduction.
2. Submit documents through the tax office with a completed 3-NDFL declaration or online (section “Life Situations” / “Submit 3-NDFL Declaration”).
3. Wait for a response from the tax office - a maximum of 3 months from the date of filing the application.

If the deduction is approved, then after receiving a notification from the tax authorities, the money will be transferred as early as next month - the entire amount at once. The tax option is convenient because the deduction does not need to be filed every year - you can submit a return for 3 years at once.

Memo - main points when receiving a tax deduction for finishing

• The tax deduction for finishing costs is included in the property deduction when purchasing real estate and is issued along with it.
• To receive a deduction, the property must be purchased, unfinished and not be an apartment, that is, non-residential premises.
• Due to the property deduction, you can return 13% of the costs for materials and finishing work, for the development of design and estimate documentation (maximum 260 thousand rubles or 520 thousand in total for spouses).
• All expenses must be supported by documents - checks, contracts and other documents.
• You can apply for a tax deduction yourself by filling out and sending the 3-NDFL declaration (return for the previous 3 years) to the tax office, or through your employer (for the current year).