Your mortgage and interest deduction

In the current Dutch tax system, your income is divided into three different so-called 'boxes':

  • Box 1:
    In Box 1 all income is taxed according to the tax bracket rate of your income from labour, benefits, pensions, business, and homeownership.

    If you have not yet reached the retirement age ('AOW-leeftijd'), then the following tariffs apply to Box 1 in 2022:

    Bracket

    Taxable income

    Percentage

    1

    Up to € 73.031

    36,93%

    2

    From €73.031

    49.5%
  • Box 2:
    Taxes income from 'significant stakes'. You have significant stakes if you own at least 5% of the shares of a private company or a limited company.
  • Box 3:
    In Box 3 your income is taxed. Your net capital consists of your possessions minus your debts.

 

Mortgage interest tax relief

The tax on a mortgage you have taken out for purchasing, keeping up and/or improving the privately-owned home is deductible from your income in Box 1. From the paid mortgage interest, the so-called 'flat-fee for privately-owned homes' is deducted. The flat-fee for privately-owned homes amounts in almost all situations to 0.45% of the value of your home under the Valuation of Immovable Property Act (WOZ). 

The amount of the mortgage interest tax relief is dependent on your income and on the tax bracket under which the tax relief deduction is considered. 

Example:

Imagine your income to be € 35.000,-. Yearly you have € 5,000,- of mortgage interest tax relief and the flat-fee for privately owned homes is € 900,- (0.45% x € 200.000,-, the value of your home under the Valuation of Immovable Property Act). The net tax relief is € 4,100,-. The amount of the tax relief is calculated as follows: 

  • € 4,100,- at 37.07% = € 1.519,87

For everyone considered under the highest bracket of the income tax, the rate at which mortgage interest can be deducted is accelerated. In 2022 a deduction of the mortgage interest is still possible at the rate of 40% maximum and from 2023 37.10%.

The decrease in the tax deduction is somewhat compensated by a step-by-step fall in the flat-fee for privately owned homes. In 2022 the flat-fee for privately owned homes is 0.45%.

The costs for taking out a mortgage can be deducted from your income in Box 1 once. This is possible in the year in which you take out that mortgage. The most important deductible costs are:

  • Costs for the mortgage deed;
  • Assessment costs;
  • Guarantee provision NHG (National Mortgage Guarantee);
  • Penalty interest charged for refinancing a loan;
  • Advice and mediation costs.

 

Buying your first house

You are allowed to deduct the interest of a loan for a maximum of 30 years. 

When buying your first home, you can only deduct mortgage interest if you take out an annuity mortgage or a linear mortgage.

 

You buy a new house or you are going to change your mortgage

If you have taken out a mortgage before 1 January 2001, the 30-year term applies to the loan with the amount as determined on 1 January 2001. For every new loan a new 30-year term commences. 

As of 1 January 2013, new mortgage regulations apply. But for those who already had a privately-owned home with a mortgage on 31 December 2012, a transitional arrangement exists.  

If you are moving to a different home, then you can transfer your current mortgage type to your new home. The lender will judge what your possibilities are at that moment on the basis of the applying rules for mortgage lending. If you have an existing savings-based mortgage or banksaving mortgage, you can transfer them to a new mortgage (see also: fiscally quit continuation (fiscaal geruisloze voortzetting)). Almost all lenders maintain the rule that you are allowed to loan 50% of the market value of your new home redemption free. If you need an additional mortgage, you will only be able to deduct interest if you take out an annuity mortgage or a linear mortgage. 

The transitional arrangement also applies to the modification of your mortgage. This is the case as well if you are selling your home and buying a new home at the end of the same or the following calendar year at the latest. 

When selling your home with gains, you must transfer the (fiscal) capital gain to the new mortgage. The fiscal capital gain will decrease the maximum mortgage debt. This arrangement is called the additional credit regulation.