In this article, we consider the main conditions for the BSU scheme and highlight current changes that came in 2021 and which still apply.
Who can save in BSU?
Housing savings for young people, or BSU, was already introduced in 1992 when Section 16-10 of the Tax Act came into force. The scheme is best known for providing favorable tax deductions when saving for housing. The scheme has seen a number of changes in recent years. In this article, we consider the main conditions for the BSU scheme and highlight current changes that came in 2021 and which still apply.
The purpose of the BSU scheme is to help “young people” enter the housing market. According to the scheme, you are a youth up to and including the year you turn 33.
It will not be possible to continue saving from the year you turn 34. However, the BSU account will not automatically be closed, and some banks offer an extended period with a favorable interest rate. When you lose the favorable interest rate, it can be profitable to look at alternative savings methods that give better returns in the long term.
There is otherwise no lower age limit for using the BSU scheme, but you cannot take advantage of the tax deduction until you have taxable income. Due to the rules on joint taxation with parents, there is no taxable income until the earliest age of 17.
The scheme with BSU operates according to the principle that “the table catches”. It is only possible to create one account per person, and it is not possible to create a new BSU account once the previous account has been settled. However, it is possible to move a BSU account from one bank to another.
Note: The money you deposit is first tied to the BSU account at the end of the year (31.12). You can therefore choose to withdraw money before 31. 12 the same year they were installed.
Increase in annual savings amount from 2021
In 2021, the savings amount was increased from NOK 25,000 to NOK 27,500. With a right to a 20% tax deduction on the savings amount, this means that you can get NOK 5,500 in tax deductions a year by depositing NOK 27,500.
However, there is an upper limit to how much can be deposited into the BSU account during one year. This limit remains unchanged for 2022 and is NOK 300,000. Amounts above this must be refunded.
What about the interest rates?
There are fairly favorable interest rates on BSU accounts in contrast to regular savings accounts.
In this connection, it is important to specify that the interest earned during a year is not included in the calculation of the savings amount when calculating the right to tax deductions. The interest is also not taken into account when calculating the maximum savings amount of NOK 300,000.
Before the age of 34, the interest can only be withdrawn when the savings amount is used for housing. After the age of 34, you can withdraw interest that has been earned from and including the income year in which you turn 34.
New from 2021 – no tax deduction if you already own a home
Previously, it was possible to buy a home without simultaneously draining the BSU savings account. That way, you could buy a home and at the same time continue to benefit from the tax deductions through the BSU scheme.
The purpose of the BSU scheme is to help young people enter the housing market. If you already own a home, you have already achieved the purpose of the scheme. The government therefore considered it necessary to limit the scheme so that users did not receive both in a bag and a sack.
With effect from 1. of January 2021, only those who do not already own a home will receive a tax deduction under the BSU scheme. Full and partial ownership are equated here.
For the future, it also means that you lose the right to tax deductions if you acquire property before 31 December in the income year. However, the good interest rates remain until the age of 34.
Note: It is ownership as of 31.12 in the income year that is decisive, and which cuts off the right to tax deductions. On the other hand, this means that you take up the right to tax deduction again in the year you sell the home and do not buy a new home at the same time before 31 December. Provided that the BSU account has not been used in the meantime.
What can you use the BSU savings for?
What many may not be aware of is that breaching the terms of the BSU leads to demands for repayment of previously granted tax deductions. Partial breach, in the same way, gives a partial claim for repayment. It is therefore important to know what the BSU savings can be used for, so that you avoid breaking the terms.
This is permitted under the scheme:
• Purchase of a new home for own use
• Land purchase
• Payment of interest and installments on loans on existing housing
• Acquisition of a garage. Given that the acquisition takes place 5 years after you acquire the home. The garage must belong to the home.
• New from 2021: Expenses and maintenance of own home
This falls outside the scheme:
• Purchase of leisure property
• Purchase of secondary housing
• Paying off debts on properties other than your permanent home