Basic overview of a home mortgage interest deduction

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Home mortgage interest deduction is a discount for the owners of a home mortgage.

It is a scheme in the Dutch Income Tax Act of 2001 that the interest of a debt incurred for the purchase of own property (usually a mortgage loan) can be deducted from income in box 1, before payment.

The mortgage is thus paid to the creditor, while the tax which the debtor must pay due to the settlement of the mortgage on his total income is lower.

The law provides that new mortgage interest paid is deductible only if it is a loan that is repaid during the term. This is particularly the case for the linear and the mortgage annuity.

One can within limits repay a portion of the monthly payments to borrow again but without additional mortgage. The mortgage interest dates back to 1893, when it was proposed by the Liberal finance minister Nicolas Pierson.

Home acquisition debt

The debt whose interest is deductible for the first 30 years is referred to as the home acquisition debt.

The home acquisition debt is primarily the aggregate amount of the debts incurred for the acquisition of a private home, and reduces redemption.

Private property debt applies only to the first house, not any second, holiday homes, etc. The home acquisition debt is also applicable to first homes abroad, so it applies to people who pay income tax in the Netherlands and live across the border.

As stated, interest is deductible on the home acquisition debt up to 30 years, a restriction that was applied in 2001. However, the interest remains deductible until January 1, 2031 for those who already deducted without mortgage before January 1, 2001.

If the purchase of a new home mortgage is higher than the original maximum of the previous mortgage, going as far as the difference a further period of 30 years .

Debt whose interest is not deductible

Debts other than home acquisition debt are deductible in box 3. This also applies to home acquisition debt whose interest is no longer deductible (after 30 years).

The latter follows from IB art. 2:14 (allocation between and within the taxable income), paragraph 3a: debt on which the interest on the basis of a specific provision in Chapter 3 or 4 of deduction are excluded, in determining the taxable income from savings and investments.

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