LDP plans to extend home loan tax cut

JIJI

The Liberal Democratic Party-led government plans to extend the tax break program for mortgage holders due to expire this year by about five years.

They are also considering raising the program’s annual maximum tax break to ¥500,000 from ¥200,000, sources said Sunday.

The extension will be included in the ruling bloc’s tax reform proposal for fiscal 2013, which may be compiled as soon as Jan. 24.

In the program, a certain percentage of a housing loan can be deducted from the borrower’s income tax. If the deduction exceeds the size of his income tax payment, the difference can be deducted from the borrower’s residential tax as well, up to a limit of ¥97,500.

The program originally capped the size of the tax cut at ¥500,000, but this was gradually lowered to ¥200,000.

Because assistance for home buyers after the two-stage consumption tax hike starts in April 2014 is one of the main issues in tax reform debate, the government has found it necessary to extend the program, the sources said.

It also plans to increase the maximum amount that can be deducted from residential taxes because many low- and middle-income households pay more residential taxes than income taxes, the sources said.

But growing cuts in the residential tax, a local levy, could erode municipal tax revenues. So such measures as covering the ensuing falls in their tax receipts with special subsidies are also being considered, the sources said.