【Wealthy CityLinkers】Tax Season: Smart Tax Strategies for Homeowners and Mortgage Payers

The May tax filing season has officially begun, with the Inland Revenue Department having issued approximately 2.77 million individual tax returns on the 4th of this month. Every year at this time, many taxpayers miss out on various legitimate deductions due to rushed filing, leading to unnecessary overpayment of taxes. In fact, with calm planning within the bounds of compliance, one can effectively reduce chargeable income.

This year, the government maintains a 100% salaries tax reduction, with the cap per case significantly raised from last year’s HKD 1,500 to HKD 3,000.

Furthermore, starting from the Year of Assessment 2026/27, several allowances will be increased: the basic allowance rises from HKD 132,000 to HKD 145,000, the married person’s allowance from HKD 264,000 to HKD 290,000, and the child allowance from HKD 130,000 to HKD 140,000.

Key Focus for Homeowners

Among all claimable deductions, homeowners carrying the heaviest asset burden should pay special attention to the “Deduction for Home Loan Interest.” The current basic deduction amount is HKD 100,000 per year. Starting from the Year of Assessment 2024/25, if the taxpayer resides with their first child born on or after 25 October 2023, the deduction cap may increase to HKD 120,000. This deduction can be claimed for up to 20 years of assessment, which need not be consecutive. Taxpayers can strategically claim in years when interest expenses are highest to maximize tax savings.

However, successful claims require meeting multiple conditions: The property must be a residential property in Hong Kong, and the taxpayer must actually reside in it during the year of assessment (subletting requires a proportional calculation). The loan must be used to purchase the residential property and secured by that property. The lending institution must be the government, a licensed moneylender, an employer, or an organization approved by the Inland Revenue Department. Married persons have the flexibility to choose separate assessment, joint assessment, or nominate their spouse to claim, thereby making good use of transferable deduction amounts to optimize the family’s overall tax burden.

Other Deduction Items Worth Utilizing

Apart from home loan interest, taxpayers should be aware of various salaries tax relief measures. In terms of the “Three Tax Deductible Products” arrangements: Mandatory MPF contributions have an annual deduction cap of HKD 18,000, serving as a basic tax-saving channel for all employees. Tax-deductible voluntary MPF contributions and qualifying annuity premiums together share an annual deduction cap of HKD 60,000, suitable for those with long-term retirement plans. Additionally, the Voluntary Health Insurance Scheme premiums offer a deduction of HKD 8,000 per insured person per year. Together, these three items provide a maximum annual tax deduction of HKD 68,000 for each working taxpayer.

Furthermore, qualifying charitable donations exceeding HKD 100 can be claimed, with the deduction capped at 35% of income after allowable outgoings. The maximum deduction for personal education expenses is HKD 100,000. Tenants can also claim a domestic rent deduction, capped at HKD 100,000.

By making good use of the government’s various tax relief measures, allowance adjustments, and deduction benefits, taxpayers can not only legally reduce their tax burden but also optimize the family’s long-term financial structure, injecting more cash flow into long-term wealth creation planning.

 

Paxson Fung, Partner, CityLinkers Group

For original article, please visit: https://www.hkcd.com.hk/hkcdweb/content/2026/05/13/content_8754782.html