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Today's story will be a bit more difficult. That is, what happens to your mortgage deduction if you get transferred overseas? This is because many of our foreign clients ask us, “What will happen to my mortgage deduction if I am transferred overseas?

Because many of our foreign clients ask us, “What will happen to my mortgage deduction if I am posted overseas?

How can I get the mortgage deduction even if I am posted abroad? How can I avoid losing money?

This is because we receive many inquiries such as “What will happen to my mortgage deduction if I am transferred abroad?

This is a very in-depth topic, so we will be sharing the information in a series of articles.

6. Renting or selling is also recommended to reduce the mortgage burden while returning home/working abroad.
In order to reduce the burden of housing expenses that will increase due to the lack of mortgage deductions while returning home/working abroad, it is a good idea to sell or rent out your home.

Even if you own a house, you are not making the most of it if no one lives in it.

Especially if you are returning/expatriating to a foreign country and your term of office is not clearly defined, you may just keep paying the mortgage without knowing when you will be able to return.

The recommended solution to this problem is to sell the house you own to make money or rent it out to generate rental income.

Rather than continuing to pay the mortgage on a house you don't live in, you can use your owner-occupied house as an asset.

If you are interested, please consult with a real estate agent.

7. Q&A on Mortgage Deduction upon Returning Home/Overseas Assignment
We have compiled a list of questions and answers in a Q&A format regarding mortgage deductions while returning home/on overseas assignment.

Please refer to it.

7-1. If only family members return to Japan after returning home/being posted overseas, can they receive the mortgage deduction if they have a remaining period of stay?

Q. “My entire family is posted overseas. My older child is preparing to take the high school entrance exam, so my wife and child decided to return home first and live in the house they own. I have two years left on my mortgage deduction. Can I resume the mortgage deduction?”

A. The mortgage deduction can be reinstated if the home was acquired on or after April 1, 2016.

When reopening the mortgage deduction, the deduction can be made even if the family member, not the person eligible for the deduction, lives in the house again.

Note, however, that if the residence was acquired before April 1, 2016, it is not eligible for the deduction if the residence was acquired abroad by a single person.

7-2. I purchased a house for my family back home to live in while I am on overseas assignment. If I remain posted abroad alone and my wife and children live in the house, can I take the mortgage deduction?

Q. “I am currently living in Taiwan with my entire family due to an overseas assignment. My wife and children have decided to return home first to coincide with the children's schooling. It will be more than a year before I can return home myself, but I am considering buying an apartment for my family to live in first because I think the rent is a waste of money. Can I take the mortgage deduction even though it will be more than a year before I will be able to live there?”

A. You can take the mortgage deduction as long as your family will start living in the house within 6 months of the acquisition of the house.

In order to receive the mortgage deduction, you must start living in the house within 6 months of acquiring the house.

However, even if you cannot live in the house while you are posted abroad, if your family members start living in the house within 6 months of acquisition, you will meet the requirements and be eligible for the mortgage deduction.

If your family starts living in the house more than 6 months before the acquisition, you will not be eligible for the mortgage deduction, so please try to coincide your purchase with your family's return to Japan.

7-3. I purchased a new condominium but will be transferred overseas before its completion. I have never lived in the apartment, but intend to live there after returning to Japan. If I am still in the mortgage deduction period, can I take the mortgage deduction after returning to my home country?

Q. “I purchased a new condominium while it was under construction. However, before it was completed, I was assigned to an overseas post and will be going abroad without ever living in it. The assignment is scheduled to be for 3 years, and I intend to live in the condominium I purchased upon my return. Since I should have seven years left on my mortgage deduction period, can I take the mortgage deduction after I return home?”

A. You cannot take the mortgage deduction after returning to your home country.

In order to receive the mortgage deduction, you or your family must start living in the house within 6 months of acquisition.

If you are transferred abroad before completion, you will not be able to start living in the house within 6 months, and the mortgage on the condominium you purchased will not be eligible for the deduction.

Since the property is not eligible from the beginning, you will not be able to receive the deduction even if you return to Japan during the mortgage deduction period.

Please consider investing in condominium assets on the assumption that the mortgage deduction is not available.

7-4. I live in an owner-occupied house with my common-law spouse, but I will be posted overseas. Can the common-law wife continue to receive the mortgage deduction since she will continue to live in the owner-occupied house?

Q. “I am not registered as a married couple, but live in the home I own with my common-law spouse. I received a letter of appointment for an overseas assignment, and since my spouse has to work, I decided to go abroad on my own. Can my common-law spouse continue to receive the mortgage deduction because he/she will continue to live in the home?”

A. No. You cannot continue to receive the mortgage deduction.

The mortgage deduction is available only if the “spouse, dependents, or other relatives living in the same household” continue to live in the house.

Since common-law relatives are not considered relatives, they are not eligible for the mortgage deduction even if they share the same living arrangements.

8. Summary
We have explained the mortgage deduction for overseas assignments.

The mortgage deduction is not available if you live alone or if your entire family moves abroad.

If you are posted abroad alone and your family continues to live in the home you own, you can continue to receive the mortgage deduction as long as the home was acquired on or after April 1, 2016.

If you complete the necessary procedures at the tax office before returning to your home country, you will be able to receive the mortgage deduction again when you return to your home country and live in your home again, as long as the mortgage deduction period is still valid.

Be sure to complete the necessary procedures before returning to your home country to avoid losses and make the most of the deductions available to you.


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