Interest is the price you pay to a bank or other lender when you borrow money, buy things on installments, and more. According to current tax legislation, cost interest is deductible against interest income and income from work (salary). What this means is that, if you have income and / or salary to offset, so to speak does not pay full price for your credit. You receive the discount in the form of a tax reduction on your estimated tax per calendar year.
Interest and fees for loans
It is important to note that it is only interest costs that constitute deductible costs on a loan or other type of credit. Fees, such as, for example, setup fees, newspaper fees and any delay fees and collection fees are never deductible. In addition, interest added to the debt due to late payment is not deductible. However, so-called interest rate differential compensation is deductible.
Each lender is required to specify all the costs you have to pay for your loan, with interest and fees separately, so that you can easily see what constitutes interest and what constitutes fees.
The lenders usually send a so-called control statement to the Swedish Tax Agency (with a copy to you) at the end of each calendar year. When you receive your declaration sometime in March-April, your total cost rates will be pre-filled. If you do not receive a check assignment, you may enter the interest costs manually on the declaration and submit the loan details in the field “Other information”.
Deductions for interest – an example
You take out a loan of $ 20,000 for which you pay $ 2000 in interest and $ 400 in fees during a calendar year. The fees are not deductible, so it is $ 2000 that you can include as cost interest in your tax return. This amount is taken up to 30% against the estimated tax for the calendar year. Below is a calculation so that you can see how the interest deduction works in practice.
Income (salary and other income) = $ 250,000
Estimated tax (32%) = $ 80,000
Deductible interest rate = $ 2000
The deductible interest rate is calculated at 30% ($ 600) against the tax, which means that your estimated tax is reduced by $ 600 and lands at $ 79,400.