Homeownership: deductible items!

We can understand that filing your annual tax return is not always on the top of your list. However, if you bought a house as your main residence, the tax return becomes much more fun! The reasoning for this is the deductible items that are associated with homeownership.

The owner-occupied home is taxed in box 1. The Dutch tax office calculates a deemed profit (0.50%) over the WOZ value of your house, which is called the eigenwoningforfait. There is no official translation for this but commonly used is the notional rental value. Nevertheless, the deductible items are often higher than this eigenwoningforfait and, therefore, this is seen as a threshold to deduct the deductible items regarding homeownership. The amount that ultimately remains is the balance of the owner-occupied home (in Dutch: saldo eigen woning).

transfer tax

Mortgage interest

The interest on the loan of your house is one of the most commonly used deductible items. Most of the time, it regards the mortgage interest. However, it can be another type of loan to arrange the financing of your house. We already wrote about the family bank, which is a well-known alternative to the mortgage.

But in addition to this interest, here are more types of deductible items regarding homeownership. We discuss them in this article.

Financing costs

In general, the rule applies that the costs incurred to finance the owner-occupied home are deductible once: in the year you bought the house.

Notary costs

Only the notary costs that are incurred in order to arrange the loan are deductible. This includes the costs for:

  • drawing up the mortgage deed;
  • registering the mortgage deed with the land registry;
  • drafting up the transfer deed;
  • registering the transfer deed with the land registry.

Mortgage advisor

In many cases, a mortgage advisor is engaged when buying a house. The costs of their advice are only deductible if the loan is actually taken out.

Young man and woman sitting on floor in kitchen and talking. Loving young couple spending time together at home.

Commissions

Banks are no longer allowed to charge this, but it still exists. If you take out a loan elsewhere (for example, at the family bank like discussed earlier), this can still be the case. Therefore, the commission is deductible up to 1.5% of the debt with a maximum of € 3,630 (for tax partners, this amount is doubled).

Additional costs

Next to the financing costs mentioned above, there are more items deductible from your taxable income in box 1. Here, you can read what those costs are. Consider, for example, the taxation/appraisal costs and the costs for the NHG. In addition, the commitment fee you pay to extend the interest in the offer, and the guarantee fee are also deductible.

Penalty interest

Sometimes, it happens that you make extra repayments on your mortgage or that you refinance your mortgage. In these cases, you have to pay penalty interest. The reason for this is that the lender misses out on interest income. The good news is that you may deduct this penalty interest from your taxable income in box 1.

Ground lease

In some cases, you have to pay ground lease. You have to pay this when the municipality retains ownership of the piece of land on which your house is located. In Amsterdam, the ground lease is very common: the municipality still owns 80% of the land. Only the periodic payments on the ground lease are deductible. Another option is to buy off the ground lease, but unfortunately, it is no longer deductible.

The Dutch tax system

Non-deductible

To avoid misunderstandings, we also mention the most common costs that are not deductible in this article.

  • We already mentioned which notary costs are deductible, but it is good to know that notary costs for the purchase deed are not deductible.
  • The transfer tax to be paid is also not deductible. Here, you can find more information about the transfer tax and its regulation.
  • Are you planning to renovate your house? These costs are not tax-deductible.
  • Note: when you sell a house with a surplus value, you must use this amount when buying a new house (within 3 years): this is the additional credit regulation. Would you rather buy something else for this? Of course, that’s possible! But then you may only deduct the interest on the purchase price minus the equity.

We are happy to help!

Do you have questions about the deductible items regarding homeownership? Or did you buy a house, and could you use our help with the tax return? We are happy to help! Please contact us via our details mentioned below!

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+31 (0)20-2170120