Tax return and homeownership in the Netherlands

From the 1st of March it’s time for the annual income tax return. If you own a property in the Netherlands in which you live yourself (an owner-occupied home) and have a mortgage, there are costs that you can deduct from your taxable income. There are also costs you must add when filing your tax return. What does homeownership in the Netherlands means for your taxes? Which costs are tax deductible in your income tax return? And which taxes do you have to add up as a homeowner? You can read it in this article.

Did you buy purchase a house or refinance or increase your mortgage last year? Then it’s good to know that you can deduct the financing costs of your tax income if you live in the house yourself. Of course, if you have a mortgage, you can also deduct the mortgage interest from your taxable income every year.

You can deduct the following costs of purchasing and financing a home when filing your income tax return in the Netherlands:

• Mortgage advice (financing costs)
• Notary fees and cadastral rights of the mortgage deed
• Appraisal costs to obtain a mortgage
• NHG ('Nationale Hypotheek Garantie')
• Refinance penalty
• Mortgage interest deduction
• Ground rent canon

Please note that you can't deduct the costs of a renovation of your house from your income tax return (except for national monuments). However, if you arranged a loan to cover these costs, the financing costs and interest are tax deductible in the Netherlands. It does not matter whether this loan is a mortgage or a consumer credit.

Other costs you've made to purchase your house are non-deductible when you file your tax:

• Real estate agent fees
• Property transfer tax
• Ground lease buyout fees

Did you sell your home with equity? Then you have money left over after your mortgage debt has been repaid. If you buy your own home again within three years, your new mortgage is not fully deductible.

The mortgage interest that you may deduct from the income tax return may not exceed the purchase price of your new house minus the equity of your old home. That's why most people invest the equity in their new property. If you don't want to use your equity and want to borrow more, the mortgage interest on the additional amount is not deductible.

• You sold your property with a surplus value of € 50,000
• You paid € 450,000 for your new house
• Your deductible maximum mortgage is € 450,000 - € 50,000 = € 400,000 
• If your mortgage is higher than € 400,000, you're not eligible for mortgage interest deduction above this amount

If you own a house, you build up equity capital. That's why people who own a house also must add an amount to their taxable income when they file an income tax return in the Netherlands. This is called the notional rental value. The notional rental value is a percentage of the WOZ value of your home. The municipality determines your WOZ value every year.

Please note that you use the WOZ value of 2022 and notional rental value of 2022 for your tax return over the year 2022 (that you file in 2023).

• WOZ value € 0 - € 12,500: 0%
• WOZ value € 12,500 - € 25,000: 0.15%
• WOZ value € 25,000 - € 50,000: 0.25%
• WOZ value € 50,000 - € 75,000: 0.35%
• WOZ value € 75,000 - € 1,130,000: 0.45%
• WOZ value € 1,130,000+: € 5,085 + 2.35% of the value over € 1,130,000

• The WOZ value of your house is € 400,000
• You multiply your notional rental value with 0.45%
• Your notional rental value is € 400,000 x 0.0045 = € 1,800
• You add this amount to your taxable income

Do you have a tax partner? In that case you may divide the income and deductible items from your house and mortgage between the two of you. It doesn't matter how you divide them, as long as they add up to 100%.

If you and your tax partner both own a house, you must choose for which property you want to deduct the interest and add notional rental value to your income. You can't do this for both properties, since you can only have one property as your main residence, and you can only deduct mortgage interest for an owner-occupied home.

Now you know which expenses are deductible and which costs you have to add up to your income when filing your tax return in the Netherlands as a homeowner. If you have questions about your mortgage, please feel free to contact us. Our mortgage advisors are happy to help you.