Claim Tax on Home Loan? Unlock Savings Fast (2026)

If you're like many Australians, you may be wondering whether you can claim tax benefits on your home loan. With the right information, you can potentially reduce your tax burden and make your mortgage more manageable. Let's dive into how you can make your home loan work harder for you.

Understanding Tax Deductions on Home Loans

First things first, it's important to understand what tax deductions are and how they relate to home loans. In the world of taxation, a deduction is an expense that can be subtracted from your total income to reduce the amount of taxable income. However, when it comes to personal home loans, the Australian Tax Office (ATO) does not allow deductions for interest on a home loan for your primary place of residence. This is because it is considered a private expense.

However, if you own investment properties, you can claim the interest charged on the loan as a tax deduction. This is because the property is considered an income-generating asset. Understanding this distinction is crucial for homeowners looking to optimise their tax returns.

Current Interest Rates and Requirements

As of 2026, the Australian home loan market offers a range of interest rates. If you're looking at investment properties, you can expect interest rates to range from 6.49% to 12%, depending on the lender and your financial situation. This is significantly higher compared to owner-occupied home loan rates which typically range from 5.25% to 6.75%.

The criteria for claiming tax deductions on home loan interest for investment properties include:

• The property must be rented out or genuinely available for rent.
• You must be the person who is legally liable for the loan.
• The loan must be used to purchase or renovate the investment property.

Steps to Maximise Tax Benefits on Your Home Loan

While you cannot claim tax deductions on your primary residence's home loan, there are still strategies to consider:

1. Invest in Property: Consider using equity from your home to invest in rental properties. This allows you to claim interest on the loan used for the investment property.
2. Speak to a Tax Professional: Consult with a tax advisor to explore whether your home loan could be structured for investment purposes.
3. Consider a Split Loan: If part of your loan is used for investment purposes, a split loan can help manage and separate the interest that is tax-deductible.
4. Maintain Detailed Records: Keep thorough records of all expenses related to your investment properties to ensure you claim the maximum deductions available.

Expert Tips and Considerations

As experts in the mortgage broking industry with access to over 83 lenders, Esteb and Co have a few tips for homeowners and investors:

• Keep an Eye on Interest Rates: Regularly review your interest rates and consider refinancing if better rates become available.
• Utilise Offset Accounts: For non-investment loans, an offset account can reduce the interest paid on your home loan, indirectly providing financial benefits.
• Understand Negative Gearing: If your investment property expenses exceed rental income, you may be able to claim the loss against your other income.
• Review Annually: It's wise to review your loan and financial situation annually to ensure you're optimising your tax position and loan structure.

Frequently Asked Questions

• Can I claim the interest on my home loan as a tax deduction? No, not for your primary residence. However, you can claim it for investment properties.
• What is negative gearing? Negative gearing occurs when the cost of owning a rental property exceeds the income it generates, potentially allowing you to claim the loss as a tax deduction.
• Is it beneficial to use my home equity for investment? Yes, using home equity to invest in rental properties can provide tax benefits and diversify your investment portfolio.
• How can I ensure my property is classified as an investment property? Ensure it is rented out or genuinely available for rent, and maintain proper documentation.
• Should I consider refinancing my home loan? Refinancing can be beneficial if you find a lender offering a more competitive rate or product that aligns with your financial goals.
• What records do I need to keep for tax deductions? Keep records of all expenses related to your investment property, including loan interest, maintenance, and management fees.
• What is a split loan? A split loan divides your mortgage into separate portions, allowing you to manage and maximise tax deductibility on the investment portion.