The mortgage interest deduction in the Netherlands is a tax deduction. The paid interest can be deducted from your income, thereby reducing the amount of income tax owed because tax is paid on a lower income. This deduction thus provides a tax advantage for those who own their own home. The interest on a debt incurred for the purchase of a home may be deducted from your income in box 1. In essence, this means that less tax needs to be paid. The higher the debt, and thus the amount of interest paid, the greater the tax advantage.
Is the tax benefit greater the higher the income? That doesn’t necessarily have to be the case anymore. This difference has been phased out and will continue to decrease. It may become more advantageous to claim the mortgage interest deduction under the partner with the lower income.
What Else Can Be Deducted?
The mortgage interest deduction covers more than just the interest on the mortgage debt. Periodic payments for ground rent (erfpacht), leasehold (opstal), or restriction in tenure (beklemming) can also be deducted. But that’s not all, homeowners can also deduct the following:
– Advisory and mediation costs for the mortgage advisor;
– Penalty interest paid or refinancing costs;
– Commitment fee (bereidstellingsprovisie);
– Notary fees and land registry rights for the mortgage deed;
– Construction interest that relates to the period after the conclusion of the provisional purchase agreement;
– Valuation costs (only for obtaining a loan);
– Costs for applying for a National Mortgage Guarantee (NHG);
– Under certain conditions, the interest and costs of a new construction deposit (nieuwbouwdepot), renovation loan (verbouwingslening), or renovation deposit (verbouwingsdepot).
Imputed Rental Value (Eigenwoningforfait)
The benefit of the mortgage interest deduction is reduced by the imputed rental value, or “eigenwoningforfait” in Dutch. The imputed rental value is a percentage of the property’s assessed value under the Valuation of Immovable Property Act (Wet waardering onroerende zaken) and must be added to your income.
Those who pay little interest on their mortgage debt receive an additional tax deduction. If you have no mortgage debt, this extra deduction is almost as large as the imputed rental value. However, this advantage will diminish in the future. Also, it’s important to realize that the rules around the mortgage interest deduction are changing more frequently now than they were in the past.
Furthermore, different rules apply to foreign real estate (not the primary residence). See foreign real estate on Dutch tax return.
How to Apply?
The mortgage interest deduction can be applied for immediately after purchasing a house via a Provisional Assessment (Voorlopige Aanslag), but it can also be done retroactively when filing your tax return. Let Taksgemak take care of it for you!
About the author: Kelly Hendrikse blends her interest in entrepreneurship with her expertise in tax advice at Taksgemak. She assists both businesses and individuals in understanding tax rules, making complex matters more manageable. Committed to keeping her clients on the right path, she proves to be a valuable ally in any tax-related matter.