Main amendment

As part of the Cyprus tax reform effective from the 2026 tax year, a new framework of personal tax deductions has been introduced for individuals.

The reform provides deductions relating to:

• dependent children
• rent or interest for a primary residence
• capital expenditure for the energy upgrade of a primary residence
• purchase of an electric vehicle
• insurance of residential property against natural disasters

These deductions aim to address family support, housing affordability and environmental transition, while maintaining the existing deduction framework for social contributions and insurance.

Technical clarification

Income thresholds

Eligibility for most of the new deductions is based on gross family income, which must not exceed the following limits:

The family income test is applied at the household level, meaning that the combined income of spouses or partners is considered.

Deduction for dependent children

The following deductions are granted per parent for dependent children:

For single-parent families, the above amounts are doubled.

Students in tertiary education

There is no separate tax deduction specifically for tertiary education expenses (such as university tuition or accommodation). However, a university student may still qualify under the dependent child deduction, provided that the student meets the legal definition of a dependent child.

Generally, a child is considered a dependent child if they are:

• under 18 years old, or
• a student in full‑time tertiary education under the age of 23, or
• serving military service and under 24, or
• permanently incapable of self‑support.

Therefore, students aged up to 23 may still generate the child deduction for their parents, while students who have reached 24 years of age normally no longer qualify as dependent children, unless they fall within the specific statutory exceptions.

Deduction for primary residence

A deduction of up to €2,000 per person per year is granted for:

• interest paid on a performing housing loan used to acquire or construct a primary residence, or
• rent paid for the use of a primary residence in Cyprus.

If both interest and rent are paid in the same year, the total deduction remains capped at €2,000.

Payments must generally be made through bank transfers or other electronic payment methods.

Energy upgrade and electric vehicle deduction

A personal deduction of up to €1,000 per year per individual is granted for:

• energy efficiency upgrades to a primary residence
• renewable energy systems such as photovoltaic installations
• electricity storage systems
• the purchase of an electric vehicle

Where the qualifying expenditure exceeds €1,000, the unused portion of the deduction may be carried forward for up to four years, provided that the income criteria were satisfied in the year the expenditure was incurred.

Insurance of residential property

A deduction of up to €500 per year is available for insurance premiums covering residential property against natural disasters, such as:

• fire
• earthquake
• flood

This deduction is not subject to income thresholds.

Interaction with existing deductions

An important technical clarification is that the new personal deductions are granted in addition to the existing deductions available under Article 14 of the Cyprus Income Tax Law.

Practical clarification – Family income test

For the purposes of applying the family income thresholds, the number of children considered for the income test may differ from the number of dependent children eligible for deductions.

In practice:

• the income threshold may consider the total number of children in the household, while
• the deduction itself applies only to dependent children meeting the statutory conditions.

This distinction is important when determining eligibility for the deductions.

Policy commentary

The introduction of these deductions reflects a broader policy objective of the Cyprus tax reform:

• supporting families with children
• addressing housing costs
• encouraging investment in energy efficiency and sustainable mobility

At the same time, the reform maintains the existing framework of deductions for social insurance, pension and healthcare contributions, ensuring continuity within the Cyprus personal income tax system.

Interaction with existing deductions

An important technical clarification is that the new personal deductions are granted in addition to the existing deductions.

These deductions continue to apply after the tax reform.

Existing personal tax deductions

For a full explanation of the deductions that applied up to 2025 and continue to apply alongside the new reform deductions, see our detailed guide:

👉 Cyprus Corporate and Individual Income Tax Guide