If you have your own home with a mortgage, there is a good chance your mortgage interest is tax-deductible on your annual tax returns. Great, because that is financially advantageous to you (in most cases)! Curious about whether you could benefit from tax-deductible mortgage interest? We explain how it works.

Tax-deductible mortgage interest

What is tax-deductible mortgage interest?

Tax-deductible mortgage interest is a form of tax relief for homeowners. As a homeowner, you pay a specific amount of interest on your mortgage every month. You may deduct the amount of mortgage interest you pay from your income (under certain conditions). This reduces your taxable income, which means you pay less income tax on your annual tax returns.

Did you take out a mortgage after 1 January 2013? Then you can only deduct interest if you are paying off your mortgage in full within 30 years. This automatically means you must have an annuity mortgage or a linear mortgage. In addition, you are obliged to keep to the payment plan. If you do not, you lose your right to tax-deductible mortgage interest.

Effect of type of mortgage

With an annuity mortgage, you pay more interest on your mortgage in the initial period than with a linear mortgage. That sounds negative at first, but paying more interest also means you can deduct more interest on your tax returns. Many first-time buyers opt for an annuity mortgage for this reason, amongst others.

Calculating mortgage deduction: an example

Suppose: the mortgage and WOZ value of your house is € 300,000. At an interest rate of 2%, this means an annual mortgage interest of € 6,000.

Your notional rental value is the tax you pay for owning your own home. This is an addition to your income and will be 0.45% of the WOZ value in 2022. In this example, this concerns €1,350.*

And suppose your income is € 65,000 gross per year. To calculate your taxable income, you subtract your mortgage interest from this and add your notional rental value back to this. In this example, your taxable income is therefore: € 65,000 – € 6,000 + € 1,350 = € 60,350

Your employer has (if all is well) withheld income tax, and has not taken into account the fact that you have your own home.

The amount on which you have paid too much income tax is € 65,000 – € 60,350 = € 4,650.

You will receive a percentage back on this. How much that is depends on the income bracket in which you pay tax:

Tax bracket 1:  Tax bracket 2:
Gross income per year up to €69,398 (2022) Gross income per year from €69,398 (2022)
Mortgage interest deduction: 37.03% Mortgage interest deduction: 40%

In this example, the amount that you will receive back from the tax authorities (in 2022) is € 4,650 x 37.03% = € 1,721.89.

Do you have a tax partner? Then you can choose how to divide this on your tax return.

* Is your WOZ value above €1,110,000? Then the notional rental value is €4,995 (0.45% x €1,110,000) + 2.35% of the WOZ value above €1,110,000 (in 2022).

Want to know more about tax-deductible mortgage interest?

We will tell you everything about finding a home and applying for a mortgage at our free seminar. We also discuss tax-deductible mortgage interest. You will find out all you need to know in one evening and you can ask questions to our mortgage advisors directly.

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