The interest deduction is a structure through which private individuals can deduct interest expenses against both income from interest and income from service. The main motive behind interest deductions, or interest rate reductions with a different name, is that more people should have the opportunity to buy their own home, which should in the long term stimulate increased activity in housing construction.
It is precisely in the case of mortgages that the interest deduction is most relevant, but the rules regarding interest rate reductions are applied to all interest rates, that is, interest rates also on, for example, car loans and unsecured loans. The legislation makes no difference to a multi-million mortgage loan and a quick loan of a few thousand dollars.
In 2016, over USD 100 million is expected to be deducted from interest income and income from service if we look at only fast loans. The figure comes from a calculation from Svenska Dagbladet, where you have looked at the total lending from and the total interest income to the total 43 companies registered as fast loan companies with Finansinspektionen.
However, the figure of 100 million is probably just below the figure for Svenska Dagbladet based on data for Q3 2015, ie July-September. Traditionally, December and January are the two months when demand for fast loans is highest.
Each fast-loan company is obliged to report to the Tax Agency a paid interest rate for each customer per calendar year. This information is then automatically recorded by the Swedish Tax Agency on the declaration, which means that you as a borrower do not need to monitor the procedure. It is important to know that you must have paid a specific item of cost, which is referred to as “interest” in order for the information to be completed on the declaration. If the entire cost of a quick loan in the form of a fee is assessed, you have not paid any interest rate.
In order for you to then really be able to benefit from the interest rate reduction, you must have an income and / or income to offset. The interest deduction must just be deducted from your tax. The deduction is 30%, which is why you usually say that you get back a third of what you pay in interest on loans.
Most people who have the right to make an interest deduction have also paid tax to set off. At the same time, it does not have to be so and there are borrowers who cannot make deductions.
However, it is not disclosed in many high-speed mortgage companies’ marketing, and this is something that the Swedish Consumer Agency / KO has criticized. We will probably see a sharpening in 2016.