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A Government’s bill, which regulates certain laws in connection with the adoption of the Act on Housing Support (Parliamentary Press No. 730), has been in the legislative process. The changes will affect, among others, Act No. 586/1992 Coll., on Income Taxes (the “ITA”), by introducing an option to apply tax deduction of interest on a housing loan also for housing cooperative members.

Under the existing text of the ITA, the deduction from the tax base can be applied exclusively by owners of real properties financed by a mortgage, a building savings loan or a loan provided by a bank or a building society, specifically to finance their own housing needs (where other statutory conditions are met). However, the current deduction conditions do not allow deduction of interest in the case of cooperative housing (included in so-called annuity).

New Regulation

Under the proposed regulation, housing cooperatives’ members will now also be able to apply tax deduction, if their housing cooperative repays a building savings loan, a mortgage loan or loans provided by a bank or a building society to finance housing needs. Items that can be deducted include interest paid in the amount equalling the taxpayer’s share in the cooperative, if such interest’s payment is attached to that taxpayer’s membership.

The deduction can only be applied in the case that the relevant apartment is used for the taxpayer’s or his or her close relatives’ permanent living.

If a share in a housing cooperative is co-owned by spouses or is part of community property, the whole amount of interest can only be applied as a deduction in one of the co-owners or equally in each of them. The tax deduction of interest on all loans to finance housing and housing cooperatives’ loans can amount to a maximum of CZK 150,000 per year for one jointly operating household.

To be able to apply the deduction, the tax administrator has to be provided with a cooperative’s loan agreement, a cooperative’s confirmation of the taxpayer’s membership and of the paid interest, and a bank’s or a building society’s certificate of the interest paid.

The proposed changes are planned to come into effect on 1 January 2026. If the law is adopted, it will be possible to apply the deduction from the tax base in the amount of paid interest starting in the taxation period 2026.

The next discussion of the law in the third reading is likely to be held in the Chamber of Deputies on 2 April 2025. We have been monitoring the legislative process and will keep you informed about the law’s final text.

The above-provided information constitutes a basic summary of the new bill and, as such, should not be considered an exhaustive enumeration of all pieces of information concerning the deduction from tax base. If you are interested in more information, we will be happy to arrange for a detailed consultation.

Jitka Sobotková
sobotkova@clarksonhyde.cz