Step 7 continued
Deemed rental income
Private home ownership is deemed in the Netherlands to be an income constituent for income tax purposes. Costs, charges and depreciation related to home ownership are eligible for a tax allowance.
Home ownership and the expenditure referred to above are incorporated as a fixed sum in the taxable (net) deemed rental income. Also, the payable interest and the costs related to the home acquisition debt can be deducted from the progressively taxable income from employment and home ownership (box 1).
To calculate the deemed rental income you need to know the value of your home. That is based on the value periodically set by the local authority using the method prescribed in the Valuation of Immovable Property Act (WOZ). That is why this value is better known as the WOZ value.
The information you enter in your 2011 tax return should be based on the value with reference date January 2010.
The deemed rental income is calculated by multiplying the WOZ value of your home by a fixed percentage.
For a WOZ value of € 75,000 up to a value of € 1.040.000 the percentage is 0.6% up to a maximum tax due of
€ 6.240 (figures taxation 2011).
For the amount exceeding the € 1.040.000 you need to add an additional 1.3% of the WOZ-value for the amount exceeding the
€ 1.040.000
How do you calculate tax allowance?
Example tax allowance
Mr X lived in a home of his own in 2006. The WOZ value is € 250,000.00.
He has a mortgage of € 300,000 and he pays 5% interest.
The entire loan was used to purchase this home.
His income from private home ownership is calculated as follows:
Deemed Rental Income € 250,000.00 x 0.6% = € 1.500
Deductible costs € 300,000 x 5% = € 15.000
Balance of income from home ownership = minus € 13.500 = tax allowance
Example of tax, box 1:
Income € 110.000
30% ruling € 33.000
Tax levied over € 77.000,-
Balance of income from home ownership (see example above) - € 13.500
Tax base box 1 (income tax) € 63.500
In this example, the tax refund is 52% of € 13.500 = € 7.020 and a net sum of
€ 7.980 is paid in interest.
Tax within box 3
When you have savings and investments (for example in stocks and shares), 1.2% tax is due over the value of your average net worth each year that exceeds the dispensation (the tax free amount for 2011 is € 20.785 per person)
No tax is due during the period in which the 30% ruling is granted.
Savings within a savings account pledged to the mortgage or an (special) endowment policy are tax-free (with a maximum in 2012 of € 154,000 per person after 20 years), provided the duration of the payments of the insurance is at least 20 years. If you surrender the policy early, taxes are due for the amount of the payment exceeding the paid premiums.
For more information on taxation in the Netherlands, see www.belastingdienst.nl
