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The Chief Executive announced in the 2001 Policy Address today (October 10) that the Government will propose to the Legislative Council to increase the maximum amount of home loan interest deduction, for 2001/02 and 2002/03 years of assessment, from $100,000 to $150,000. This is to ease the burden of homeowners under the present economic situation.

The implementation of the proposal will result in a reduction of the tax liabilities of those homeowners liable to Salaries Tax or tax under Personal Assessment and paying, in 2001/02 and 2002/03, home loan interest in excess of the present deduction ceiling. The maximum tax saving for a taxpayer will be $8,500.

It is estimated that, for each of the two years (2001/02 and 2002/03), about 110,000 taxpayers (or 9% of the taxpaying population) who are homeowners will benefit from the proposal. The cost to revenue is estimated to be in the order of $1 billion.

The implementation of the proposal will necessitate legislative amendment. There is no need for taxpayers to make any claim at this moment. They should claim the enhanced amount in their 2001/02 tax returns to be lodged in May next year. The Inland Revenue Department will inform taxpayers of the details later.

Example:

Mr. Chan is married with annual income of $600,000. He lives in his own property with his wife and 2 children. Total home loan interest paid by him in 2001/02 (year of assessment) is $160,000.

 
 
                     Present tax payable Tax payable after    Tax saving
                                            the proposal
                             ($)                 ($)               ($)
 Income                     600,000             600,000
 Less:	Home loan interest 100,000             150,000
  deduction (maximum amount)
 Allowances                 276,000             276,000
                            -------             -------
 Net Chargeable Income     224,000               174,000
 
 Tax payable                27,580                19,080         8,500
 
 Attached is a table of relevant statistics:
 
 Home Loan Interest Deduction
 
                                                  1998/99      1999/2000
 Total number of individuals with home loan       250,000       300,000
  interest deduction
 
 Total amount of home loan interest deducted       $11.9b        $13.7b
 
 Total number of taxpayers with maximum amount     110,000       110,000
  of home loan interest deduction

End/Wednesday, October 10, 2001

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