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. 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.
This page leaves two topics to other pages. Our page on the mortgage interest deduction explains how the deduction itself works, including the 30-year term. Our homeowner tax deductions page lists every deductible homeowner cost. If you pay a penalty when you sell your home, it counts as an extra repayment. We come back to that case below.
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 Your loan must also be within its 30-year deduction window.
Pay the penalty in one go and you deduct the eigenwoningschuld part 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. That cap only matters once your income before deductions passes €78,426.²
When can you deduct penalty interest?
You can deduct penalty interest in three situations.¹ They are an extra repayment, a switch to another lender and a mid-term rate change.¹ Tarek's case is the second: he is switching to another lender.
Only the part of the penalty that relates to your eigenwoningschuld is deductible.¹
The second question is how your lender charges the penalty. Your lender can charge it as one amount, fold it into your new rate or lend it to you. The table below sets out each route and the deduction that fits it. A refund from your lender comes later, and the table covers it too.
| Which route applies | What you deduct | When you deduct it |
|---|---|---|
| You pay it in one go | The part of the penalty on your eigenwoningschuld, as mortgage interest | Once, in the return covering that year |
| It goes into your rate, through rentemiddeling | The higher rate that includes 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 How you pay decides the year of your deduction.
Pay in one go and you deduct the eigenwoningschuld part 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 go in the same part of your return. Only the year differs. Rentemiddeling only works if you stay with your current lender.
At what rate do you deduct penalty interest?
You deduct penalty interest at your own Box 1 rate, up to the maximum rate. Above a set income, the Belastingdienst caps the rate on every own-home deduction.² Box 1 is the part of your return that taxes income from work and home.
In 2026 the maximum deduction rate is 37.56%.² It only matters if your income from work and home is above €78,426, before deductions.² Below that income your own rate is already 37.56% or lower. The Belastingdienst calls this correction the tariefsaanpassing. Your tax return applies it for you.²
How much tax the deduction saves you therefore depends on your income and your rate. Our mortgage interest deduction page explains how the deduction rate is built up. The table below shows the maximum deduction rate and the income at which it starts.
| What | Applies | Income before deductions |
|---|---|---|
| Maximum deduction rate, 2026 | 37.56% | Above €78,426 |
| Your own rate in Box 1 | Your own rate, 37.56% at most | Up to €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, not a move to another lender. He would stay with his current lender, so it replaces the switch. So it is the third situation the Belastingdienst names. 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. His 2026 return would then show no 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 maximum deduction rate only affects him if his income reaches the top bracket.
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 option falls outside this comparison. If you add the penalty to your mortgage, a separate rule applies. We explain it below.
“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.
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 can also trigger penalty interest. That penalty counts as an extra repayment, so you can deduct the part that belongs to your eigenwoningschuld. Check your mortgage terms before you sell.
One more boundary matters here. Penalty interest is deductible as interest on your own home only while your loan is within 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.
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. Leaving the Netherlands after a sale? Say so in that first call. Non-residents can face different rules, so check before you sell.
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