An important aspect of many taxation systems is what’s referred to as a ‘progressive rate’. When you look at the tax rates, you’ll see that those countries are using a ‘bracket system’. Different categories, or ‘brackets’, are employed, each having its own tax rate. In short, the more income you earn, the more tax you pay. The progressive rate is designed to distribute tax more equitably, so that those with higher incomes pay a larger portion of their income in taxes than those with lower incomes. But how exactly does this work?
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.