Optimism is not often the initial feeling that comes when you hear the words ‘’Tax Return’, usually you may think of stress or anxiety. Lucky for you, one (of many) advantages of living in the Netherlands is its favourable tax framework, which can turn your frown upside down. And by favourable tax framework, we don’t just mean the 30% tax ruling, there is more than that available for you. Curious, well read on, we promise this article won’t be taxing 😉
The tax benefits of buying and owning a residential home in The Netherlands
The Dutch Tax Authorities support home ownership. So they created several benefits when you take out a residential mortgage.
1. Tax deductible costs related to getting a mortgage
First up: you can subtract the mortgage costs from your taxable income. Great news, because this lowers your tax amount.
These costs are:
- Fee for the valuation of your current home and your new home.
- Fee for the mortgage advice from the broker.
- (Part) of the fee from the notary.
- Cadastral costs regarding the mortgage deed.
- Costs for a mortgage including NHG (if applicable).
2. Interest deduction (read: pay less income tax)
Secondly: after taking out a mortgage on your residential home, you’ll of course pay a monthly fee. When you have a mortgage on a linear or annuity basis, this interest will be partially tax deductible. So this means that owning a residential home charged with a mortgage will make you pay less income tax. (See also: Provisional Tax Refund).
3. No property tax on the profit on the sale of your current home
Compared to other countries, the Netherlands don’t charge any property tax when you make a profit from the sale of your home. On the other hand, a profit on the sale of your former home can limit your mortgage interest deduction on the new home (the ‘bijleenregeling’). But overall, this is less drastic than paying a big amount of property tax.
Provisional tax refund
This refund is often considered to be a perfect way to lower your monthly cash flow. By paying mortgage interest (and /or paying costs related to taking on a mortgage), you are eligible for a tax refund. You can claim this through your annual income tax return, or, you have the option to claim this refund monthly instead of per year. We call this the ‘voorlopige teruggave’ (provisional tax refund), coincidentally this is also something we can help you with 😊; Click here for more info.
With the provisional tax refund you calculate the expected outcome of the annual tax return in the coming year. This estimated yearly refund can be paid per month upfront. When the year is finished (and your annual income tax return is done) the results of your final income tax return and the provisional income tax return of the same year will be settled.
No transfer tax
Are you under 35? Then you don’t have to pay transfer tax (which is 2% over the purchase price) if you buy a residential home below € 510,000. Of course, you can use this only one time. But this is great news, because you can save a lot of money (maximum benefit € 10,200).
Do you have questions about mortgages and taxes in the Netherlands? What the best mortgage structure is for you? Or how to claim the tax advantages? Feel free to contact us. We are here to help.
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