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august 6, 2021
Instructions on the Use of Property Tax Deduction and
Analysis of Common Mistakes
SberSolutions blog on
By Oksana Rymarenko
Руководитель группы налогового вычета СберРешений
Property tax deduction can be obtained both within purchase and sale of immovable property. Let's take a closer look at how and in what amount you can get a deduction, and what mistakes are often made by taxpayers.
Deduction within property acquisition
Who can receive the property deduction?

Deductions are provided for citizens who are tax residents of the Russian Federation, i.e. permanently residing in the RF for more than 183 calendar days per year. Besides that, they shall pay 13% PIT from their incomes, except for the incomes from dividends.

Immovable property shall be located on the RF territory, and the owner shall have all documents of title. For a new building, it is enough to receive an act of transfer and acceptance, for secondary housing - an extract from the Unified State Register of Immovable Property.
When property is acquired after marriage, both spouses are entitled to a tax refund. Only a marriage contract can become an obstacle.
How much can be returned from the budget?

The property buyer can refund as follows:
  • 13% of the cost, but no more than 260 000 RUB (2 000 000 RUB * 13%),
  • and 13% from the amount of paid interests on a mortgage or target loan, but no more than 390 000 RUB (3 000 000 RUB * 13%). The amount of deduction and procedure for transferring its balance is changed depending on the date of purchase.
It's possible to transfer the deduction balance to other objects only within acquisition of an apartment after 2014 This won't work with mortgage interests, as this deduction is provided only for one object.

When you can apply for the deduction

Option 1 - Within the next year after receiving the documents of title (for a sale and purchase agreement - this is the Unified State Register of Immovable Property, for a shared construction participation agreement - an act of transfer and acceptance).

Whenever you purchased an apartment or other housing, upon obtaining the rights of ownership, you can claim a tax refund after two years, or after ten years, as you choose.

But at the same time, the tax can be refunded only for the last three years. For example: you bought an apartment in 2016, and decided to apply for a property deduction only in 2021, 5 years later. This means that you can file a tax return for 2018, 2019, 2020. And further, if you have an unused deduction, for 2021 and subsequent years.

Pensioners can return personal income tax at once for four years: for the year in which the purchase was made, and for three previous ones.

Option 2 - Apply for the deduction to the employer in the year of the purchase and registration of documents for the property. This can only be afforded by citizens working under an employment agreement. Please note that the date of applying for refund does not affect the deduction allocation rule from 2014
SberSolutions will help you to prepare a tax return and send documents to the tax inspection without leaving your home.
How to get a property deduction

If you have chosen the second option, you shall act through your employer. To do this, you need to receive a notice on the right for deduction from the tax authorities and take it to the place of work. The accounting department will no longer withhold PIT from current earnings, and will also return the withheld tax from the beginning of the year.

Self-filing of the tax return allows you to immediately return a large amount. For this purpose, during the year we collect income certificates from all employers, prepare documents confirming the purchase, and fill out a 3-NDFL tax return. A cameral tax audit should not exceed 3 months, and then another 30 days remain for making transfer to a bank account.

With the introduction in May 2021 of the procedure for the simplified receipt of PIT deductions, the need to draw up and submit tax return has not completely disappeared. The simplified procedure applies only to some costs:

  • costs for new construction, purchase of an apartment, house, room, shares therein, land for individual housing construction;
  • interests on mortgages and other targeted loans;
  • as well as for an individual investment account.
    Besides that, the simplified scheme will only work if the bank and local authorities transmit information about the purchase of real estate to the Federal Tax Service. Therefore, you should not rely on such conditional automation of processes. It is safer and faster to independently apply for a refund of PIT.
    What errors prevent you from getting a refund?

    1. Submission of documents by a person who does not have the right to deduction. Close relatives of the seller cannot receive a tax deduction. Recipients of maternity capital are not allowed to include it into the amount for deduction.
    2. Errors in the execution of documents. You can confirm the purchase costs with a handwritten receipt, a cash receipt, a payment order or a bank statement. The receipt may not be certified by a notary, but if you confirm the expenses with a sales contract, it shall be certified and contain a clause that the seller received the money.
    3. Missing the deadline for filing the tax return. There is no statute of limitations for the property deduction, however, there is a limitation on the number of years for which you can submit the 3-NDFL form and return the money. Therefore, if you did not draw up a deduction right away, but want to do it later, remember that you can submit a tax return no more than for three previous years.
    4. Using the wrong form of 3-NDFL. The FTS periodically updates the tax returns forms, so it is important to use the form that was in effect in the corresponding reporting year.
    Deduction within property sale
    In general, as a result of the sale, you receive income from which you shall transfer 13% PIT to the budget. There is an opportunity for all sellers to reduce taxes, and for some even avoid them. Let's consider what kind of immovable property can be sold tax-free after 3 years of ownership:

    • received under a donation agreement from close relatives or by way of inheritance;
    • received as a result of privatization;
    • received under a dependent lifelong maintenance contract;
    • immovable property, purchased by any means before 01.01.2016;
    • the only home. That is, at the time of the transaction you do not own another apartment, or you sell your first apartment within 90 days after buying your second apartment.
    If you have already celebrated the 5-year anniversary of the housewarming, then you have every right to sell the property without tax burden, you will not need our further explanations.

    So, if your property does not meet any of the listed conditions, you are required to pay 13% of the proceeds from the sale and submit a 3-NDFL tax return before 30 April of the following year.

    You can reduce incomes by the amount of expenses or apply a property tax deduction. Use what is more profitable. When selling residential houses, apartments, rooms, summer cottages, garden houses, land plots, as well as shares in the said property, the deduction will be 1 000 000 RUB. When selling a car, non-residential premises, garage and other property, you have the right to reduce taxable income by 250 000 RUB.
    If an apartment is sold for an amount below 70% of its cadastral value as of the 1 st January of the current year, then 70% of the cadastral price is still considered as taxable income.
    It is possible to significantly reduce income, and therefore tax, by providing documents confirming the costs for the purchase of property. These can be cash receipts, sales and cash cheques, bank statements, payment orders, seller's receipts for funds, as well as other documents confirming the fact of purchase of the apartment being sold, for example, a sale and purchase agreement.

    Taxpayers' common mistakes:

    1. Declared the full amount of deduction for the sale of a share. Only one property deduction is granted per joint property, and sellers divide it upon mutual agreement. That is, when selling immovable property as a single object of law under one purchase and sale agreement, a deduction of 1 million roubles shall be divided between the owners depending on the size of their share.
    2. Delayed with payment of tax. If, based on the results of the tax return, it is necessary to pay tax, it shall be done no later than 15 July of the year, following the year of the apartment sale. Many people confuse this deadline with payment of property taxes before the 1st December.
    Important: from January 1, 2022, you do not need to submit a 3-NDFL tax return, if the deduction amount covers the amount of income from the sale of property.
    Why should you apply to SberSolutions? Your data is safe with us. The quality of the services provision is confirmed by certificates. We have been working in the outsourcing market in Russia and CIS for 27 years.

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