Ask a tax advisor on the topic of Capital assets

Interest on debt for spouses living separately

October 10, 2010 | 20,00 EUR | answered by Matthias Wander

Dear tax advisor,
for several years I have been living separately from my husband. He lives in our jointly acquired house. Since the beginning of this year, I have bought a condominium and took out a loan of €300,000 for which I am paying high interest. Since my husband cannot pay me the half of the house (approximately €200,000), we want to make an agreement that he should repay me approximately €1,200 per month in debts (repayment and interest). The half share of the house is rented out for €550, which he will then receive.
Questions:
Can I offset the interest income received from him against the interest on my loan for the apartment in the capital gains tax return? Since I had to take on the debt because he could not pay me the share of the house.
How should my interest income for the loan I am providing to my husband be taxed?
Does it matter whether we are separated or divorced?
Or is there another option?
Thank you in advance.
Best regards

Matthias Wander

Dear advice seeker,

Thank you for your inquiry, which I would like to answer based on the information you provided and in the context of your efforts within a preliminary consultation.

The interest income you receive from your husband is considered income from capital assets and should be declared in Annex KAP line 22 "Income from other capital claims of any kind". The saver lump sum of 801 euros can be deducted from the interest income.

Whether the interest on the loan for the condominium is deductible depends on whether you generate taxable income with the condominium. Since you occupy the apartment yourself, the loan interest is not tax deductible. Also, offsetting it against the interest income is not possible.

I regret that I cannot provide you with a more favorable response.

Best regards,

Wander
Tax advisor