How does the interest deduction work?

You can deduct interest costs ("räntekostnader") in your tax return ("deklaration") – the tax reduction ("skattereduktion") is 30% on interest costs ("räntekostnader") up to 100,000 SEK per year, and 21% on amounts above that. The deduction is made automatically if the bank reports to the Tax Agency ("Skatteverket"), but verify it's correct in your tax return ("deklaration"). The tax reduction ("skattereduktion") lowers your final tax and is usually refunded with your tax refund ("skatteåterbäring"). The effect is that your actual interest cost ("räntekostnad") is lower than the nominal rate ("nominell ränta").