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VEFA and letting: when can you start deducting?
Signed a VEFA today, keys in 2028? You can deduct loan interest before your first tenant. The 3 rules on interest, depreciation and timing, with taxx.lu.
You sign a VEFA today (an off-plan purchase), and the keys land in autumn 2028. The logical question: do you have to wait for your first tenant before you can deduct anything? No. And that is exactly where part of the tax advantage hides. Here are the rules that apply to you first, in the order your project actually happens.
Can you deduct loan interest before you even let the place?
Yes. The interest and financing costs on a loan used to buy or build a property meant for letting count as deductible expenses. And a property still under construction, not yet occupied, already opens the right to deduct. In plain terms: you can deduct the interest for the years before handover, long before the place is fit to let.
One condition, though: your intention to let has to be clear and demonstrable. A VEFA contract is a strong sign of that intention, but the tax office weighs up the full picture. So keep everything: the contract, the loan repayment schedule, your exchanges with the bank.
taxx advantage
These interest costs go on page 10 of form 100, under net rental income. taxx.lu walks you through a simple flow to the right boxes, and your estimate updates as you fill it in. If a document trips you up, our support team is there to check it with you.
Watch out
Whether you can deduct these costs doesn't depend on your resident or non-resident status, but on where the property sits: in Luxembourg or abroad. The process differs from one case to the other. Worth checking against your own situation.
Are these interest costs deductible for the whole life of the loan?
Yes, and with no cap. For a property that is let, the full interest is deductible as an income-related expense, for as long as the loan runs and the property stays let (or available to let). That is a real difference from your main home, where interest deduction is capped.
There is no maximum term either: a loan over 20 or 25 years stays deductible from the first interest payment to the last. No tax clock running on that one.
Does depreciation start when you get the keys?
No. Depreciation doesn't kick in when the keys change hands, but when the property is actually put to letting: rented out, or offered for rent. In the first year, it is worked out pro rata, from that date to 31 December.
In practice, getting the keys and putting the place on the rental market often follow closely. But hold on to the principle: what counts is the letting use, not the key in the lock.
Example
Keys handed over and the property offered to let on 1 October: the first year's depreciation covers only October, November and December, so 3 months out of 12. The rest isn't lost, it simply spreads over the following years.
