It's almost time to start thinking about filing your Dutch tax return. Peter Geurts from Klår Finance is here to tell you about the various tax benefits that homeowners in the Netherlands can receive.
Optimism is not often the initial feeling that comes when you hear the words "tax return". Usually, when you hear this, you may instead feel stress or anxiety. Luckily for you, one advantage (out of many) of living in the Netherlands is its favourable tax framework, which can turn your frown upside down.
And by favourable tax framework, we don’t just mean the 30% tax ruling, there is more than that available for you. Curious, well read on, we promise this article won't be "taxing".
The tax benefits of buying and owning a residential home
The Dutch tax authorities (belastingdienst) support home ownership among its residents. So they created several benefits that you can take advantage of when you take out a residential mortgage:
1. Tax-deductible costs related to mortgages
The first thing you should know as a homeowner in the Netherlands is that you can subtract the mortgage costs from your taxable income. This is great news for many people because this lowers the amount that you are taxed on.
These tax-deductible costs are:
- The fee for the valuation of your current home and your new home.
- The fee for the mortgage advice from the broker.
- (Part) of the fee from a notary.
- Cadastral (land ownership) costs regarding the mortgage deed.
- Costs for a mortgage including NHG (if applicable).
It is best to consult with a mortgage advisor to see which fees apply in your situation.
2. Interest deduction
The second thing to know is that after taking out a mortgage on your residential home, you'll naturally pay a monthly fee. When you have a mortgage on a linear or annuity basis, this interest will be partially tax-deductible. This means that owning a residential home that is charged with a mortgage will make you pay less income tax.
3. No property tax on the profit on the sale of your current home
The Netherlands doesn't charge any property tax when you make a profit from the sale of your home. This is different from other countries where you are often charged property tax upon your property's sale. On the other hand, a profit on the sale of your former home can limit your mortgage interest deduction on your new home (bijleenregeling). But overall, this is less drastic than paying a big amount of property tax.
4. Provisional tax refund
This refund is often considered to be a perfect way to lower your monthly cash flow. By paying mortgage interest (and /or paying costs related to taking out a mortgage), you are eligible for a tax refund. You can claim this through your annual income tax return, or you have the option to claim this refund monthly instead of per year. This is called the voorlopige teruggave (provisional tax refund), which is something that tax advisors may help you with.
With the provisional tax refund, you calculate the expected outcome of the annual tax return for the coming year. This estimated yearly refund can be paid per month upfront. When the year is finished (and your annual income tax return is done), the results of your final income tax return and the provisional income tax return of the same year will be settled.
5. No transfer tax
Are you under 35? Then you don't have to pay transfer tax (which is 2% over the purchasing price) if you buy a residential home below €510.000. However, you can use this benefit only once. This is great news for young homeowners because you can save a lot of money (with a maximum benefit of €10.200).
Figuring out your tax situation
Taking out a mortgage in the Netherlands can provide several benefits in regards to your tax returns. However, every situation is different and it is wise to consult a mortgage broker and / or a tax advisor to determine if you are eligible for tax-deductions.
Do you have questions about mortgages and taxes in the Netherlands? Perhaps about which mortgage structure is right for you or how to claim tax advantages? Feel free to contact Klår Finance, who are available to help you.