Explained: the family bank
Yet, the family bank is mainly used as a parent to lend money to your children, to help them finance a home.
What makes the family bank tax advantageous?
Actually, the family bank is a win-win situation. First, the interest is deductible for the child. On the other hand, it is advantageous for the parents, because they receive more interest than in a savings account, especially with the current low savings interest! To make the interest deductible, the loan must meet certain conditions:
How to determine the height of the interest?
Because the interest is deductible for the child and is not taxed in box 3, the family bank often calculates with a high-interest rate. But how high that interest may be is often a point of discussion. An earlier mentioned point is that the interest must be in line with the market. The tax authorities often accept a margin of 25%. So, if the bank charges an interest of 6%, you can calculate with a percentage of 7.5% within the family bank.
Do you use the family bank to finance your house? But do you also have a loan at a mortgage lender? It may be the case that you can borrow less at the mortgage lender. In other words: it is not the case that you can get too high financing for your house through the family bank!
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Do you have questions about the family bank? Or do you have other tax-related questions? We are happy to help! Please contact us for a free introduction using our details mentioned below!