Claim Home Loan Interest? Discover Savings Fast (2026)

As a homeowner in Australia, understanding what costs you can deduct from your taxes can be quite a puzzle. If you're one of the many Australians trying to get a handle on whether you can claim interest on your home loan, you're not alone. The good news is that there are indeed scenarios where this is possible, and knowing the ins and outs could save you a significant amount each year. In this guide, we'll break down the essential information you need to navigate this aspect of homeownership.

Understanding Home Loan Interest Deduction

The concept of claiming interest on your home loan primarily revolves around the nature of how the property is used. In Australia, the general rule of thumb is that you can claim the interest on a home loan if the property is used to generate income. This means that if your property is an investment property, you can claim the interest as a tax deduction. However, for owner-occupied homes, the rules are a bit different.

Investment properties allow you to claim the interest because it’s considered a cost incurred in earning rental income. For your personal residence, the interest is not deductible since the property is not generating income. However, there are exceptions, such as if you’re running a business from home or renting out a part of your residence.

Current Interest Rates and Eligibility Criteria

As of 2026, the Australian home loan market is highly competitive with varied interest rates depending on the lender and your financial situation. Investment property loans typically range from 6.49% to 8% for fixed rates, while variable rates can fluctuate between 5.75% and 7.5%. It's crucial to compare these rates and consider the terms that best suit your financial goals.

Eligibility for tax deductions on home loan interest depends on several criteria:

• The property must generate income (e.g., rental property).
• If it’s an owner-occupied property, a portion must be used for income-generating activities (like a home office).
• Proper documentation and records must be maintained to substantiate the claim.

How to Claim Interest on Your Home Loan

For those eligible to claim, here’s a step-by-step guide to ensure you’re maximising your deductions:

1. Confirm Eligibility: Ensure that your property is generating income or that part of it is used for income-producing purposes.
2. Maintain Records: Keep accurate records of interest payments and income received. This includes statements and receipts related to your home loan.
3. Calculate Deductible Amount: Determine the portion of the loan related to the income-producing activity. For a mixed-use property, you may need to apportion the interest.
4. Complete Tax Return: Include the deductible amount in your annual tax return under the appropriate section. It may be beneficial to consult with a tax professional.
5. Seek Professional Advice: Consider consulting with a mortgage broker, like Esteb and Co, who have access to 83+ lenders, to optimise your loan structure for tax advantages.

Tips and Considerations

Maximising your tax deductions while managing a home loan requires strategic planning. Here are some expert tips:

• Seek Expertise: A financial advisor or mortgage broker can provide insights into structuring your loans effectively.
• Review Loan Structures: Consider whether interest-only loans might offer tax benefits for investment properties.
• Stay Informed: Tax laws change frequently. Stay updated on any legislative changes that might affect your ability to claim deductions.
• Consider Refinancing: If your current loan structure isn't ideal, refinancing could provide better rates or terms, potentially with one of the 83+ lenders Esteb and Co can connect you with.

Frequently Asked Questions

1. Can I claim interest on my home loan for a property I live in?

   Generally, no. However, if part of your home is used for business purposes, you may be able to claim a portion of the interest.

2. How do I apportion interest if my property is partly rented out?

   You'll need to calculate the percentage of the property used for income-generating purposes and apply this percentage to the interest paid.

3. What if I refinance my home loan?

   If you refinance for investment purposes, the interest on the new loan may be deductible if it continues to generate income.

4. Do changes in interest rates affect my deduction?

   While changes in rates affect your repayments, the deductible amount is based on the actual interest paid, which may increase or decrease with rate changes.

5. Is it beneficial to switch to an interest-only loan?

   Interest-only loans can reduce monthly repayments temporarily and may offer tax benefits for investors, but it’s important to consider long-term effects.

6. How can Esteb and Co help with my home loan?

   With access to 83+ lenders, Esteb and Co can help you find a loan structure that aligns with your financial goals and maximises tax efficiencies.