The Reduction of the Mortgage Interest Deduction in the Netherlands

The Mortgage Interest Deductibility in the Netherlands

Since a few years, the interest deductibility has decreased. This means that the amount of interest paid for your mortgage loan that can be deducted has gone down every year. What does it mean for you if the mortgage interest deductibility is being reduced over the years? Read about it in this article.

The MortgageInterest Deductibility over the Years in the Netherlands

The tax rebate on your mortgage interest is being reduced over the years, which means that you can claim less of your mortgage interest than you could before. If you pay interest on your mortgage, you may be able to get a tax rebate for it under certain circumstances. This lets you subtract some of the mortgage interest you pay from your taxable income, which means you pay less tax overall.

In recent years, the amount of mortgage interest you can claim has been going down. This is known as the mortgage interest rebate being reduced up until 2023. The last time the mortgage interest credit went down was this year (2023), being reduced to 36.93%.

The Deductibility is also Applies for One-time Deductible Costs

You are able to deduct some of the costs, if you take out a new mortgage, refinance or increase your current mortgage via your taxable income as long as certain conditions are met. For example, the property must be your main residence. This includes the costs of having the mortgage contract notarized and getting a mortgage advisor to help you.

Due to the way the mortgage interest process works, you can also deduct these costs from your taxed income at a lower rate. The same numbers used to on the normal mortgage interest deduction also apply to these costs.

Why Reducing the interest Deductibility in the Netherlands?

Politicians have been debating the mortgage interest deduction for years. It is unjust, according to many opponents, for homeowners to profit from it while tenants do not. Furthermore, compared to other nations, the Netherlands is more liberal with this approach. Consequently, it was agreed to gradually eliminate the mortgage interest deduction beginning in 2014.

As of 2020, the phaseout process was hastened since the administration believed it was not moving swiftly enough. The current record low mortgage interest rates also played a role in this choice. Homeowners would thus experience the phaseout's financial effects less severely. This, of course, has changed in the past 1,5 years. The interest rates have increased significantly, which means that it will be felt by all home owners.

The Interest Deductibility Scheme from 2014 up until 2023 in the Netherlands

The maximum mortgage interest deduction for those with higher incomes has been scaled away beginning on January 1, 2014, by 0.5% per year. The Tax Authority has sped up the phaseout by an extra 3% each year beginning in 2020. The deduction for mortgage interest is now 36.93% in 2023. The deduction will continue to be made at this proportion as of 2024. More information will follow when available.

There is still a tax rebate regarding the mortgage interest. The deduction, meanwhile, is far smaller now than it was a few years ago. The table below demonstrates how this has moved in the past years:

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What happens after 2023 with the Mortgage Interest Deductibility in the Netherlands

The maximum mortgage interest deduction has been gradually decreasing over the years. The last stage of the decrease happened this year in 2023. The maximum deduction for mortgage interest is 36.93% as of 2023.

Households with lower and moderate incomes will also see a little less mortgage interest deduction. This is due to a minor reduction in the tax rate for the first income category, from 37.07% to 36.93%. The difference, though, is so negligible that this particular set of homes won't be much affected.

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