Rental income: how is this taxed?
We notice that there is a lot of uncertainty about the rental income and how it is taxed. We understand this lack of clarity all too well. How you report this income to the tax authorities depends on the situation. With the help of this article, we hope that we can familiarize you with this.
Temporary rental of your own house
Are you leaving your main residence for a while? And are you going to rent out this house temporarily? In that case, you must declare 70% of the rental income as “income from temporary rental” in BOX 1.
Renting out part of your own house
If you meet the following conditions, you do not have to submit the rental income:
- Rental income was lower than € 5,249 (2018) and € 5,367 (2019);
- During the entire rental period, you and the tenant(s) are registered at the address;
- It is not an independent living space (own kitchen and toilet);
- It is not a short-term holiday rental.
Do you not meet the room exemption?
If you do not meet the criteria, you must declare part of the house as property. Besides, you have to declare the home acquisition debt as debt in BOX 3.
Furthermore, the ‘normal’ rules apply to the owner-occupied home. The notional rental value will be lower, but you will also have less interest deduction.
Rental second home
You do NOT have to state the rental income of your second home. The reason for this is that a second home is taxed in BOX 3. The tax authorities charge a fixed return on this income.
Since saving is no longer profitable and you do have some savings, you are thinking about buying a second home for rent.
You can buy this house for € 350,000 and rent it out for € 1,750 per month (€ 21,000 per year). Your gross return on an annual basis (€ 21,000 / € 350,000 = 0.06 x 100) is 6%. And this rental income is untaxed!
Be aware! You still have to pay wealth tax on the WOZ value of the home minus any mortgage debt on the house. As a tenant, you also have to pay for various other costs, such as any VVE costs.
Rental of a house for sale
When you put a house up for sale, but you still rent it out via the Leegstandwet, you do not have to state the income you receive at all. During the rental period, you must state the house in BOX 3. The mortgage interest will no longer be deducted.
We are happy to help!
Do you still have questions regarding the rental income after reading this article? Or do you have other tax-related questions? We are happy to help you! Feel free to contact us using the information below.