Wealth tax, how does it work?
You pay income tax not only on your income but also on your assets. But what exactly does capital mean and how is tax calculated on it? Whether it is the things you own, shares, savings or everything together, we will explain it briefly and powerfully.
What is your net worth?
If you look around, you can already see a lot of your assets. It starts at your home. Real estate is seen as part of your assets. This is included in box 1 or box 3 depending on whether it is your main residence or not. In addition to the visible properties, there are of course also the invisible properties. This means that not only your (savings) money, but also your investments in shares and/or funds are included in the calculation. Other investments, such as a pension savings account or life insurance, only count towards your assets if you do not meet the conditions for an exemption.
Your own home, i.e. your main residence, will not be taxed as assets for income tax but will be taxed in box 1 (income from work and your own home). However, a second home does fall under the taxable capital in box 3.
If you own antique furniture or art that is worth a lot of money, this is not included in your assets as standard. If you own these items to decorate your home and only use them for private purposes, they will fall under the exemption and will not be taxed in box 3.
All the things mentioned together do not yet constitute your assets. These are your possessions. To calculate your assets, you minus your possible liabilities. Your debts may include credit card debt, other personal debt, and mortgages for homes that are not your primary residence. Please note that there is still a threshold of € 3,400. You may therefore not deduct your debts up to that amount. If you file a tax return with a tax partner, this threshold doubles. In that case, you deduct €6,800 from your debts.
How is tax calculated?
Your assets are taxed in box 3. In that box, your assets are divided into three different categories: bank and savings deposits, investments plus other assets, and finally your deductible debts. Because the actual return is not taken into account, a different fictitious return percentage is applied to each category. The percentage for your investments and other assets is already fixed, which is 6.04%. The percentages for your bank and savings balances and deductible debts will be announced at the beginning of 2025. There is a good chance that it will be around 1.03% for savings and around 2.47% for your deductible debts.
How do these fictitious returns work? Imagine that the percentage for bank and savings deposits is indeed 1.03%. Then 1.03% of the value will be taxed on January 1 at the 2024 tax rate, which is 36%. Fortunately, there is also the tax-free allowance. This is the capital on which you do not have to pay tax. That is €57,000 per person.
We are happy to help!
It remains wise to seek professional advice on tax issues. It can happen to anyone that something is overlooked or a mistake is made. Unfortunately, this may result in a fine. So if you have any questions or would simply like to check with a tax advisor whether everything is correct, you can always contact us. Together we can ensure that you can cross taxes off your to-do list with peace of mind.
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