Property Purchase
Private pension savings can help with buying a home
By using your private pension savings to buy a home or to pay down a mortgage, you can use the savings without paying income tax on them. The savings can thus help you save for a down payment and/or reduce the principal of your loan faster.
- Tax-free payments into a mortgage: Subject to certain conditions, the savings can be used to pay down the principal of a mortgage without paying income tax on the amount.
- First-time buyers: They can use both their accumulated private pension savings for a down payment when buying or building a first property, and direct their monthly contributions into the loan, subject to certain conditions.
- Lower debt and interest costs: The payments reduce the principal of the loan faster and can thereby reduce interest costs in the long run.
- Applying: Applications are made on the website of Iceland Revenue and Customs.
Example
An individual earns 650,000 kr. per month. They contribute 4%, or 26,000 kr. per month, to private pension savings and their employer pays 2%, or 13,000 kr., as a matching contribution. A total of 39,000 kr. per month, or 468,000 kr. per year, therefore goes into private pension savings that can be used tax-free to pay down a mortgage, subject to certain conditions. Take-home pay, however, only falls by 16,100 kr. per month, not 26,000 kr., because the employee's own contribution reduces the taxable income base.
* The calculation is an estimate based on the 2026 tax brackets; the personal tax credit and other circumstances can affect the final amount.
Private pension savings - First home
Accumulated private pension savings can be used when buying a first property and/or monthly contributions can be directed into a mortgage, subject to certain conditions (see the website of Iceland Revenue and Customs). Among the conditions are that the ownership share is at least 30% and that the application is received within 12 months of the signing of the purchase agreement. The authorisation can also extend to those who have not owned residential property in the last five years.
Private pension savings – payments into a mortgage
Private pension savings can be used to make monthly payments into a mortgage for up to 10 years. The measure is available to everyone who meets the conditions set by Iceland Revenue and Customs and is therefore not only intended for first-time buyers. The main conditions are that the person owns at least 30% of a residential property for their own use, has their registered legal residence there and that the loan is secured by a lien on the property. In addition, the person must not have used the tax-free authorisation to direct private pension savings towards housing for a total of ten years.
How do I apply?
Applications are made on the website of Iceland Revenue and Customs. To use contributions from January 2026, the application must be received before 1 December 2026. Applications received after that date apply from the month in which they are submitted.
Conditions and limits may depend on each person's circumstances. We encourage you to familiarise yourself with the current rules at Iceland Revenue and Customs and to contact Gildi if you need help with information about your private pension savings.
Questions and answers
The authorisation covers up to 4% of the employee's own contribution, up to a maximum of 333,000 kr., and up to 2% of the employer's contribution, up to a maximum of 167,000 kr. The combined maximum is 500,000 kr. for each twelve-month period.
Using private pension savings tax-free means that you can use the savings to pay down a mortgage and/or put them towards a down payment on a first home without income tax being paid on the amount when it is used.
The member must own at least 30% of a residential property for their own use, have their registered legal residence there, and the loan must be secured by a lien on the property. The person must also not have used this tax-free authorisation for a total of ten years.
Additional contributions can be used tax-free towards housing for a combined total of up to ten years. Previous use of comparable measures can therefore affect the time remaining.
Yes. First-time buyers can use accumulated private pension savings when buying or building a first home and/or direct monthly contributions into a mortgage. Among other things, the application must be received within 12 months of the signing of the purchase agreement and the buyer must own at least a 30% share. The authorisation can also extend to those who have not owned residential property in the last five years.
Specified private pension can be used tax-free towards buying or building a first home, subject to the conditions of the measure. The authorisation can also extend to those who have not owned residential property in the last five years. Specified private pension can, however, only be used once the balance in private pension savings has been fully used but the maximum authorisation of the measure has not. Specified private pension does not, on the other hand, fall under the general authorisation to direct private pension savings into a mortgage.
The employee's own contribution, up to 4% under a private pension savings agreement, is deducted from the taxable income base. The calculated tax therefore falls along with the contribution, and take-home pay falls by less than the contribution because it is deducted from wages before tax. The exact effect depends, among other things, on income, tax bracket and use of the personal tax credit.