Is penalty interest tax deductible in the Netherlands?
Yes, in three situations and only for part of your loan.¹ That part is your eigenwoningschuld, your home-acquisition debt.¹ Penalty interest is what your lender charges when you break a fixed-rate period early. In Dutch that is boeterente. Its official name is vergoeding voor vervroegd aflossen, a fee for early repayment.
Take Tarek. He is a food technologist in Rotterdam and bought his flat four years ago. He is now two years into a 10-year fixed rate and wants to move his mortgage to another lender. His lender will charge him penalty interest for leaving early.
Two things sit outside this page. Our page on the mortgage interest deduction explains how the deduction itself works, including the 30-year term. The full list of deductible homeowner costs sits on our homeowner tax deductions page. A penalty charged when you sell your home is not one of the three situations. We come back to that case before you sign.
In short
Penalty interest is deductible in three situations: an extra repayment, a switch to another lender or a mid-term rate change.¹
Only the part of your loan that counts as eigenwoningschuld qualifies. That is your home-acquisition debt. The rest falls outside the deduction.¹
Pay the penalty in one go and you deduct the whole amount in your return for that year.¹
Choose rentemiddeling and the penalty goes into your rate instead. You then deduct the higher rate every year, for the remaining term of your mortgage.¹
Raise your mortgage to pay it and the penalty stays deductible. The interest on the increase does not.¹
In 2026 you deduct at 37.56% at most once your income before deductions passes €78,426.²
When can you deduct penalty interest?
You deduct it after an extra repayment, a lender switch or a rate change.¹ Tarek's move is the second of the three the Belastingdienst names.¹
One limit runs across all three. Only the part of the penalty that relates to your eigenwoningschuld is deductible.¹
The second thing to settle is how the penalty reaches you. Your lender can charge it as one amount, fold it into your new rate or lend it to you. The table below runs through those routes and the deduction that fits each one.
| Which route applies | What you deduct | When you deduct it |
|---|---|---|
| You pay it in one go | The whole penalty, as mortgage interest | Once, in the return covering that year |
| It goes into your rate, through rentemiddeling | The higher rate that carries the penalty | Every year of your mortgage's remaining term |
| You borrow it on top of your mortgage | The penalty itself, but not the interest on the increase | Once, in the year you paid the penalty |
| Your lender refunds it later | Comes off the mortgage interest you deduct next | In your next return |
How do you claim penalty interest in your tax return?
You enter it as deductible mortgage interest for your own home.¹ Which year it lands in depends on how you pay.
Pay in one go and you deduct the full amount once, in your return for the year you paid it.¹ Your lender can also fold the penalty into a slightly higher rate for the remaining term of your mortgage. That is rentemiddeling.¹ You deduct the higher rate every year instead.¹
Both routes land in the same part of your return. They differ in the year your deduction falls. Not sure which route fits your situation? We work through both routes with you and set them side by side.
At what rate do you deduct penalty interest?
You deduct the penalty at your own Box 1 rate, up to a ceiling. The route you pick changes the year, not the rate. Above a set income the Belastingdienst caps the rate for every deductible cost of your own home.²
Is your income from work and home above €78,426 in 2026, before deductions? Then your deduction runs at no more than 37.56%.² The Belastingdienst calls that correction the tariefsaanpassing. It applies only in the top bracket.² Your tax return applies it for you.²
How much tax the deduction saves you therefore depends on your income and your rate. We work that out with you for your own situation. How the deduction rate is built up sits with our mortgage interest deduction page. Below you see the ceiling and the income it starts at.
| What | Applies | Income before deductions |
|---|---|---|
| Maximum deduction rate, 2026 | 37.56% | Above €78,426 |
| Your own rate in Box 1 | No ceiling | Up to €78,426 |
| What the ceiling covers | Every cost of your own home, including this penalty | Above €78,426 |
How does Tarek's penalty interest work out?
Tarek pays his penalty in one go, so he deducts it once. His whole loan qualifies as eigenwoningschuld, so the full penalty is deductible. He moves to another lender in 2026 and pays the penalty that year. In his 2026 return he enters the whole amount as deductible mortgage interest.
His current lender also offered him rentemiddeling. That route is a mid-term rate change rather than a move, so it is the third of the three situations. Take the Belastingdienst's own example figures for it. The new rate is 3.0% and the penalty adds 0.1% on top.¹ Tarek would then deduct 3.1% every year of the remaining term of his mortgage.¹ Nothing would land in his 2026 return as a single amount.
So the two routes differ in timing, not in whether he may deduct at all. Which one leaves him better off depends on his rate, his remaining term and his income. The ceiling only reaches him if his income passes the top-bracket threshold.
Tarek's lender calculates the penalty from its own loss. That calculation differs from lender to lender, so the amount is a question for your own quote.
One route stays outside that comparison. Adding the penalty to your mortgage carries a rule of its own, set out below. Readers often ask what to bring to a first conversation. Our advisor answers that next.
“People ask us whether a penalty is worth paying. The answer sits in three numbers: the penalty, the new rate and the years you have left. Bring all three and we can tell you where you stand.”
What do you check before you sign?
Check which part of your loan qualifies and how you will pay the penalty. And what happens if your lender pays part of it back later?
Did your lender refund penalty interest you had deducted in an earlier year? Then you offset the refunded amount against the mortgage interest you pay next.¹ That correction goes into your next return.¹
Selling your home changes the picture. A penalty charged when you sell is not one of the three the Belastingdienst lists. We therefore look at your own case before you plan around a deduction.
One more boundary matters here. Penalty interest is deductible as interest on your own home only while your loan sits inside its 30-year deduction window. Our mortgage interest deduction page covers that window.
Moving lender is where most penalties arise. Our refinance mortgage page sets out what a switch costs and when it pays off. Buying your next home with the surplus from this one falls under the bijleenregeling. That page explains what the rule means for your next purchase.
The notary fee on your mortgage deed follows rules of its own, which our notary costs page sets out. Want every deduction you can claim in one place? Start from our tax deductions overview.
This is general information, not personal advice. In one conversation our mortgage advice team looks at the penalty, your deduction and the move together. Tarek brings his lender's quote and the split of his loan to that conversation.
1 belastingdienst.nl, Boeterente - mag ik die aftrekken in mijn belastingaangifte? · Accessed
2 belastingdienst.nl, Minder aftrek voor uw eigen woning als u een hoog inkomen hebt · Accessed