The Swedish Parliament has officially approved legislation to phase out tax deductions for interest paid on unsecured loans. This policy shift marks a significant change in how consumer debt is treated within the Swedish tax system. The new regulations differentiate between loans backed by collateral, such as mortgages, and those without security, such as personal loans and consumption credits.
Implementation of the new rules is scheduled to begin in 2025. The government has opted for a two-step process to gradually remove the tax benefit rather than eliminating it abruptly. By 2026, the ability to deduct interest expenses for these specific types of debts will be completely removed.
Timeline for the Phase-Out
The removal of the interest deduction will occur over two tax years. Currently, borrowers in Sweden are generally entitled to a tax reduction amounting to 30 percent of their interest costs on capital deficits up to 100,000 SEK. This applies to most forms of borrowing. However, the new legislation alters this specifically for loans lacking collateral.
Changes for the 2025 Tax Year
Starting January 1, 2025, the transitional period begins. During this tax year, the deduction will not be removed entirely but will be significantly reduced. Borrowers will only be permitted to claim a deduction based on 50 percent of their actual interest costs for unsecured loans.
For example, if a borrower pays interest on a private loan during 2025, the tax authority will only recognize half of that amount as the basis for the tax reduction. This effectively halves the financial relief provided by the state for these specific debts during the transition year.
Full Implementation in 2026
From the start of the 2026 tax year, the deduction for unsecured loans will cease to exist. Interest paid on debts that do not have an asset pledged as security will no longer reduce a borrower’s final tax bill. The full cost of the interest will be borne by the borrower without any subsidy from the tax system.
Defining Unsecured Loans
The legislation targets “lån utan säkerhet,” which translates to loans without security or collateral. In the banking sector, these are often referred to as “blanco” loans. A loan is considered unsecured when the borrower does not pledge a specific asset, such as a residential property or a vehicle, to the lender as a guarantee for repayment.
Several common types of credit fall under this category. The most prominent is the standard private loan sweden residents use for consumption or consolidation. However, the list of affected financial products is extensive and includes specific purpose loans that do not utilize the object purchased as collateral.
List of Affected Loan Types
The following loan types are examples of debts that will lose their tax deductibility status under the new rules:
- Privatlån (Private Loans): Standard unsecured installment loans.
- Medlemslån (Member Loans): Loans offered to union members, often at negotiated rates but typically unsecured.
- Kontokredit (Account Credit): Overdraft facilities and credit card debts.
- Sollånet (Solar Loans): Loans specifically for installing solar panels, provided they are not added to the primary mortgage.
- Energilånet (Energy Loans): Financing for energy improvements that are not secured by the property.
Housing-Related Unsecured Loans
A critical distinction in the new rules involves loans that are related to housing but are technically unsecured. While a primary mortgage is secured by the house or apartment, other financing steps in the home-buying process often involve unsecured debt.
Specifically, a bridge loan sweden homeowners use to cover the gap between buying a new home and selling an old one is typically unsecured. Similarly, down payment loans (handpenningslån), which cover the initial deposit before the main mortgage is finalized, are often unsecured. Under the new legislation, interest on these specific parts of home financing will no longer be deductible, even though they are connected to a real estate transaction.
Calculation Examples
To understand the financial impact, one must look at how the tax reduction is calculated currently versus how it will function during the phase-out.
Under the system prior to 2025, a borrower paying 5,000 SEK in interest on a private loan receives a tax reduction of 30 percent. This results in 1,500 SEK being deducted from their final tax liability.
Impact in 2025
In 2025, the calculation changes. If the interest cost remains 5,000 SEK, the deductible amount is first halved. The tax agency will base the deduction on 2,500 SEK (50 percent of the total interest). Applying the 30 percent tax relief rate to this halved amount results in a tax reduction of 750 SEK.
Impact in 2026
In 2026, the deduction is eliminated. A borrower paying 5,000 SEK in interest on an unsecured loan will receive 0 SEK in tax relief. The net cost of the loan increases as the state subsidy is removed entirely.
Loans That Retain Tax Deductions
The Parliamentary decision explicitly protects loans that are secured by collateral. The primary objective of the reform is to target consumption-based borrowing rather than asset-backed financing. Consequently, the tax deduction rules remain unchanged for mortgage loans sweden residents hold against their residential properties.
For a loan to qualify for continued interest deductions, the collateral must be formally pledged. This typically applies to:
- Residential Mortgages: Loans secured by a house, apartment (bostadsrätt), or vacation home.
- Secured Car Loans: Loans where the vehicle itself serves as the security for the lender.
- Boat Loans: Financing where the vessel is pledged as collateral.
Borrowers with these types of debts will continue to see their interest costs reported to the Swedish Tax Agency (Skatteverket) and will receive the standard 30 percent tax reduction on capital deficits, subject to existing ceilings and regulations.
Administrative Procedures
The Swedish Tax Agency manages interest deductions automatically for most individuals. Banks and financial institutions are required to report interest paid by their customers annually. This data is then pre-printed on the individual’s tax return (inkomstdeklaration).
With the new rules, financial institutions will need to differentiate between secured and unsecured interest in their reporting to the authorities. For the vast majority of loans in sweden, this process will remain automated. However, the categorization of the loan at the bank level will now determine whether that data translates into a tax reduction on the final tax statement.
