When Kwame received the keys to his first home in Tema, it felt like the final step in a long journey. After years of planning and saving, he was finally a homeowner. However, like many Ghanaians, Kwame was unaware of a powerful tax benefit available to him, one that could reduce his annual tax burden and make his mortgage more affordable.

The Ghana Income Tax Act, 2015 (Act 896) provides a significant tax concession for individuals who take loans to construct or acquire a single residential property in Ghana. This concession comes in the form of a mortgage interest deduction, which can reduce the chargeable income of qualifying individuals. Note that the relief must be claimed once in your lifetime and for only one residential property.

The full interest component of your monthly mortgage repayment is deducted from your total chargeable income before tax liability is computed. This means your annual chargeable income is reduced by your annual mortgage interest, lowering your tax liability.

A quick delve into Kwame, who earns GHS 10,000 monthly and pays GHS 4,000 monthly on his mortgage, of which GHS 2,400 is interest, he can deduct GHS 2,400 from his chargeable income. At a marginal 25% tax rate, this reduces his tax from GHS 2,500 to GHS 1,900, saving him GHS 600 per month and GHS 7,200 a year. Please note, however, that the loan’s interest portion decreases monthly, per the amortization schedule.

To qualify, the mortgage must be secured from a recognised local lender or employer and the property acquired in your name and occupied as your primary residence. However, you’re ineligible if you're a non-resident Ghanaian.

To claim the deduction, submit proof of ownership, primary residence status, loan agreement with interest payments to your employer (if taxed at source) or include it in your annual tax return (if self-employed). You may consult with a tax professional or the Ghana Revenue Authority for detailed guidance.

Though underutilised, this tax relief makes homeownership more affordable by lowering your tax burden. First National Bank Ghana goes beyond its offering of competitive mortgage rates, providing expert guidance and education to help you unlock the full financial value of your home.

For more information on the mortgage tax relief and other benefits of the mortgage products, interested readers should speak to their mortgage advisors at First National Bank.