Building Bonuses Shift Focus: Primary Residences Now Key to Higher deductions
A period of broadly available building renovation incentives is drawing to a close. The government is implementing a more selective approach to tax discounts, specifically capping the highest rate – 50% – for taxpayers undertaking work on their primary residence. This shift will reduce the number of eligible beneficiaries and necessitate careful planning for any home advancement projects.
The defining factor for accessing the 50% deduction is now definitively the classification of a property as a “first home.” Interventions on secondary residences and non-residential properties will be subject to lower rates, aligning with a pre-existing trend of gradually decreasing benefits.
Tightening Regulations and What’s Changing
The new regulations establish a standard deduction of 36% for most building recovery work. The 50% rate is preserved only for projects undertaken on a taxpayer’s primary residence,making renovations to a family’s core living space still financially beneficial. However, the changes aren’t limited to reduced benefits; stricter criteria are being introduced, and the scope of eligible interventions is being narrowed.
Looking ahead to 2026,the system will become even more selective. Deduction rates will be further reduced,and the distinction between primary and secondary homes will become even more pronounced.Work lacking a demonstrable impact on safety or energy efficiency will be actively discouraged, with incentives directed towards improvements that enhance quality of life and promote responsible resource utilization. The goal is a more streamlined and targeted incentive system, prioritizing those who permanently reside in the property being renovated.
Eligibility: Who Qualifies for the 50% Bonus?
To qualify for the higher 50% rate, taxpayers must hold a legitimate property right (real right) on the property and designate it as their primary residence. Importantly, this condition can be met after the completion of the work, provided the taxpayer transfers their residence within the legally defined timeframe. This allows for strategic renovations aimed at transforming a property into a primary residence, maximizing potential tax benefits.
Conversely, tenants, borrowers, and individuals lacking a valid property title are excluded from the 50% deduction. They, along with owners of properties not classified as primary residences, will only be eligible for the standard rates. Further complicating the landscape is the limited availability of option financing mechanisms like credit transfer and invoice discounting, now restricted to specific circumstances.
Thus, anyone considering renovation work must meticulously evaluate project timing, the nature of the interventions, and the property’s intended use to avoid unexpected issues and fully leverage the remaining opportunities.
