Last modified: 13 May 2015
The interest paid on a mortgage (that is concluded to finance the purchase or to improve the house) is tax deductible if the house is used as your main residence. The interest can be deducted for a maximum of 30 years.
Mortgage deduction in the 4th tax bracket
As of 2014, the maximum tax rate at which mortgage interest can be deducted decreases by 0.5 % per year. In 2015, the rate for deductible expenses related to the main residence is therefore 51.0% (instead of 52% in 2013).
2018: maximum mortgage 100% of the property value
Until 2018, the government gradually decreases the Loan-to -Value to 100% (including transfer tax). This means that from 2018 you can’t get a mortgage which is higher than the value of your house and that you can also only deduct interest up to a loan of this percentage (in case you arrange additional loans besides the mortgage). The government is doing this step by step to ease the pressure on starters and give homebuyers time to save. A higher loan up to a Loan-to-Value of 106 % remains possible for energy-saving investments such as insulation, energy efficient windows and doors and solar water heaters.
The expenses related to the conclusion of the mortgage loan are also tax deductible:
When you have the 30% ruling you can still claim these deductions although it may be possible that because of the 30% ruling your taxable income is taxed at a lower tax rate leading to a lower deduction. But the normal tax rates still apply.
Although the mortgage interest is tax deductible, you must pay tax on the so called “deemed rental value” (eigenwoningforfait) which is based on the WOZ value of the property. Compared to the deduction of mortgage interest, this is in most cases a relatively low amount, namely 0.75% of the WOZ value. This WOZ value is estimated every year by your municipality. They send you a statement. The WOZ value is also mentioned on the local property tax assessments. If you can't find anything contact the local town hall or maybe even your neighbours (if they have exactly the same property).
If you leave the Netherlands and decide to maintain the property and rent it out , you will remain taxable with respect to the Dutch property as a non-resident taxpayer. As the property will no longer be your main residence, the property will become taxable in income tax “box 3”, which means that the mortgage interest is no longer tax deductible and that the net value of the house will be subject to a deemed return levy (resulting in a tax of 1.2% of the net value of the house). On the other hand rent you receive is tax free. So make sure that the rent covers the costs and the mortgage interest.