Did you know that paying off a mortgage in advance can have tax benefits? In case you've never stopped to make the calculation, today we will tell you that the mortgage can be subject to deductions. So at the time of closing the year, in this case 2018, it can come in handy to balance the accounts.
In some cases, and in order to deduct as much tax as possible, there is the possibility of making additional contributions. But only in some cases. In the end, what is involved is to pay less when making the income statement and we can do it through the mortgage that we have for a home.
By making extra contributions, we can reach the maximum limit, but to do it correctly, it is necessary to have done some calculations first. What we want to propose below are a series of calculators that you can find on the internet to find out if you can still pay off your mortgage or, if on the contrary, it is no longer convenient for you to contribute more this year.
Should I pay off the mortgage at the end of the year?
Let's start with the theory. If at the end of the year you have extra money (it does not happen often, but who knows), an interesting option to achieve a better result in the income statement is to amortize the mortgage on a home in advance .
In this way, we can get more out of the personal income tax deduction for the purchase of a habitual residence . At the same time, we will have the opportunity to save a portion - no matter how small - corresponding to the interest that the loan inevitably carries.
To do this, yes, you have to meet certain requirements. And it is that not everyone can deduct for their home , even if it is usual. Only those who bought their home before 2013 can do so. From that year and thereafter, taxpayers can no longer make this deduction and therefore are not in a position to take advantage of the possibility of paying off the mortgage so that the declaration of rent will be better in 2019.
Neither can this deduction be applied to those who do not use the mortgaged home as usual. That is, there is no use paying off the mortgage on the beach house. We must have lived in the home for at least three years in a row .
How to calculate the deduction for habitual residence
Now let's see how we can do the calculation. The truth is that we are going to present you different online calculators that will be useful to you, but if you prefer to do the inquiries by hand first, you should know that: the first thing is to add all the installments you have paid for your mortgage, plus the life insurance money or home . These last two amounts have to be added to the sum if you hired them as a sine qua non condition when signing the mortgage (you know that many banks require certain connections from their clients, so they can sign with a slightly lower interest).
Do you already have the sum? From there, you must calculate 15% of the amount, which is the percentage that we can deduct, with a maximum base of 9,040 euros . In this way, the maximum deduction that we can get is 1,356 euros in personal income tax. These 1,356 euros are the highest amount you can save in the income statement.
What we must do as mortgage holders is perform the calculation and see if with what we have paid, we have already reached the ceiling of 1,356 euros to deduct in personal income tax . If not, we will have the option to repay early. If we have already exceeded that threshold, nothing needs to be done.
Another casuistry that we must take into account is that of the couples that make the individual declaration instead of joint. In these cases, each of the spouses may deduct 15% of the contribution, on the basis of 9,040 euros. It is a good way to deduct up to 1,536 euros each.
Calculators to know how much to pay off my mortgage to deduct more in the Income Statement
If you want you can do the calculation yourself, but if you have never done it or you have doubts about whether the result is correct, it is better to use a calculator. On the internet you can find many, so we are going to propose you a few tools that will come in handy to know if this is a good time to pay off your mortgage and deduct more in the Income Statement.
One of the calculators that can work best for you is the one offered by Cinco Días on its page. From here you will have to enter different information about your personal, family and work situation . For example, it will be necessary for you to indicate your annual gross salary, your age, your professional category (if you are an active worker), if there is geographic mobility and in which autonomous community you reside and file.
You will have to add family information, such as the number of children under 25 years of age , dependents over 75 years of age, children under three years of age, under 65 with a dependent disability and the handicaps, of the taxpayer or family members. in charge (if they have any).
It will also be necessary for you to indicate your contributions to the pension plan, if you have made one, how much you have paid for the mortgage and if you have made donations to NGOs or non-profit organizations.
Once the calculation is done, what you will get will be a table with all the data corresponding to personal income tax withholding, but also to tax savings. Based on these amounts, you can check if you still have to reach the 1,356 that you can deduct and therefore, this will be the time to amortize. If you've already reached that top, you won't need to write off. Surely you better invest that money in a short-term deposit.
But this is not the only calculator that you have at your fingertips. Here's another one, in which you can exclusively calculate the deduction for habitual residence. It will only be necessary to enter the amount paid during the year for your mortgage and the year of acquisition of the home.
Finally, we want to propose you to download a couple of Excel documents through which you can make a detailed calculation of the amortization table of your mortgage . By amortizing ahead of time (and before the end of the year), you will not only be able to get a deduction in your personal income tax.
But you will also have the option to save money and time. With these two files you can simulate the amortization discounting time or discounting fee . You will see that with the first you can save much more than with the second, but the final decision is in your hand.