On June 16, 2025, Act No. 176/2025 Coll. was published in the Collection of Laws, amending Act No. 586/1992 Coll., on Income Taxes (hereinafter referred to as the “Income Tax Act”), regarding the non-taxable part of the tax base concerning so-called mortgage interest. This amendment was presented as part of a broader legislative package to support housing. According to its proponents, the proposal responds to growing problems with housing affordability and seeks to align tax conditions between taxpayers who finance their housing needs through their own loans and those who use cooperative housing.

The amendment thus aims to enable the deduction from the tax base for individuals also for amounts corresponding to the interest on housing cooperative loans, which the taxpayers—their members—in fact pay as part of the so-called annuity.

Current legal regulation

Currently, the deduction of interest on so-called mortgage loans from the tax base is governed by Section 15, paragraphs 3 and 4 of the Income Tax Act. A taxpayer of income from individuals can thus deduct from their tax base the interest paid on a loan for financing so-called housing needs, namely in the case of:

• a building savings loan;
• a mortgage loan;
• another loan provided by a bank or building society, if it is tied to a housing need.

The deduction from the tax base is further conditional (among other things) on the above-mentioned types of loans being provided directly to the taxpayer and used for the housing needs defined by Section 4b of the Income Tax Act. The subject of the housing need must be used by the individual for their own permanent residence or the permanent residence of their family (spouse, descendants, parents, etc.). The law then sets a limitation on the deduction, where the maximum limit of deductible interest for one jointly managing household is no more than CZK 150,000 per year. In this context, we would like to remind you that with effect from January 1, 2021, the limit on the amount of interest that can be applied within a jointly managing household as a non-taxable part of the tax base was reduced from CZK 300,000 to CZK 150,000. More information on the transitional provisions can be found on the financial administration’s website.

The existing regulation, however, did not include loans from housing cooperatives, even in cases where housing cooperative members factually repay this interest through an annuity. This, according to the proponents of the amendment, led to an unequal position between owners of properties financed by a mortgage and members of housing cooperatives.

New legal regulation from 2026

It will now be possible for a member of a housing cooperative to deduct from their tax base an amount corresponding to the interest on a loan that the housing cooperative took out to finance housing needs, under the following conditions:

• the loan is from a building savings scheme, a mortgage, or provided by a bank or building society;
• it is used exclusively for a specified housing need according to Section 4b of the Income Tax Act (e.g., purchase, construction, or repair of an apartment building);
• the taxpayer, i.e., the individual, is a member of the housing cooperative and pays the housing cooperative amounts corresponding to the interest for their share (i.e., cooperative apartment).

However, for a cooperative member to be able to use the deduction, similar conditions must be met as in the case of a personal mortgage loan for housing needs, namely the condition that the taxpayer is a member of the housing cooperative and uses the subject of the housing need for their own permanent residence or the permanent residence of their family (spouse, descendants, parents, etc.).

It also applies here that the maximum amount that can be deducted for interest from personal loans and housing cooperative loans combined remains at the level of CZK 150,000 per year for one jointly managing household.

The new regulation will also affect what the taxpayer, or the member of the housing cooperative, will have to prove to claim the deduction, specifically:

• the housing cooperative’s loan agreement (sufficient to submit upon the first claim);
• confirmation from the housing cooperative of the individual’s membership in the housing cooperative;
• confirmation from the housing cooperative of the amount corresponding to the interest paid by the taxpayer;
• confirmation from the bank or building society of the interest paid by the housing cooperative.

The amendment is therefore already valid, but the changes in the Income Tax Act will be applied for the tax period of 2026. For the first time, members of a housing cooperative will be able to deduct interest paid for the year 2026, regardless of when the membership in the housing cooperative was established or when the loan agreement was concluded by the housing cooperative.

The new change thus brings a tax relief for members of housing cooperatives and unifies their position with persons financing their own housing with a mortgage. We will therefore see whether this step will truly support housing in the Czech Republic and help improve the availability of cooperative housing, especially for households that cannot afford individual mortgage financing.