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Is the penalty interest deductible?
Yes. The penalty interest that you have paid for an extra redemption or for transferring your mortgage is deductible. If you will pay off your mortgage sooner or want to transfer the mortgage to another lender, your current lender will lose interest income. The compensation that you have to pay for this is called the penalty interest. The penalty interest may be deducted from the tax return. The TaxSavers is happy to help you with all deductible costs and ensures that you get the most optimal tax benefit. Fill in the contact form and we will go through the options.
When are you dealing with penalty interest?
It is possible to pay penalty interest in two different situations, namely:
- When you want to transfer your mortgage to another lender.
- When you pay off more than is permitted annually (most lenders allow you to repay 10 to 20 percent per year without a penalty).
No penalty interest will be charged if you have a variable interest rate instead of a fixed-rate period, if you sell your home, if the mortgage interest with the lender is higher at that time and if the fixed-rate period has ended.
How does it work?
You may deduct the penalty interest from your taxable income once in the year that you paid the penalty interest. It is also possible to finance the penalty interest in the mortgage. In that case, the interest you paid on the penalty interest may not be deducted from your income. This implies that if you have paid a penalty interest of €3,500 and your annual income is, for example, € 35,000, you only have to pay tax on an income of € 31,500. If you have a tax partner, you can divide the deductible costs among yourself, this can provide additional benefits.
We are happy to help you!
The TaxSavers is happy to help you get the most out of the deductible items with your annual tax return or provisional assessment. A provisional assessment ensures that you receive a monthly refund from the tax authorities.
Do you have questions regarding the deductible penalty interest or other tax-related matters? Fill in our contact form or give us a call on +31 (0)20 – 2170120.