2018-12-22

Mortgage Interest Deduction Finally Arrives

Mortgage interest deduction was inevitable given widespread home ownership and expensive mortgages soaking up disposable income.

Xinhua: China unveils special individual income tax deductions
The State Council, China's cabinet, announced special individual income tax deductions on Saturday, in order to lower the tax burden for those who have certain expenditures.

Those expenditures cover six areas, including children's education, continuing education, health treatment for serious diseases, housing loan interests, rent and elderly care.

...Taxpayers or their spouses who have mortgage loans for a first home can have a deduction of 1,000 yuan per month from taxable income.

Housing rent deduction of up to 18,000 yuan each year will be granted to taxpayers owning no housing in the city where they work.
It doesn't sound like a lot, but China has relatively high thresholds for taxation.
An amount of up to 2,000 yuan every month will be deducted from an only-child taxpayer's taxable income for his or her parent who is over 60. Those who have siblings can share the 2,000-yuan deduction quota.

...For children's education, an amount of 1,000 yuan (about 145 U.S. dollars) will be deducted every month from the parents' taxable income for each child's education from preschool all the way to doctoral education, including technical education.
An only child with a home and a child could deduct 4,000 yuan per month. A renter 5,000 yuan. The standard deduction is 5,000 yuan. In the tax brackets where this matters most, it could turn into savings of between 350 yuan per month up to 1,000 yuan. That's not a lot of money in urban China these days, but considering some families have little left over after paying the mortgage, it could represent a translate into a significant bump in disposable income.

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