Optimize your personal deductions 

In this news item individual income tax deduction opportunities are highlighted. It is good to bear in mind that most personal deductions are available only to full Dutch tax residents or to non-residents who are eligible for opting in. Reach out to one of our advisors in case you have deduction related questions. Some deductions may have a maximum or a threshold.

Donations to charities

In the Netherlands donations or gifts to charities are deductible. Depending on the cause of the payment and a registration of the receiving charity (so-called ANBI or SBBI entities) there are restrictions and conditions applicable. Spreading your donations may be beneficial. Example of a deductible donations are payments to e.g. a church, museums, healthcare foundations and music or sports related entities. 

Education expenses

Educational expenses can be deducted in case they are meant for deriving income. Do note that new legislation will be applicable as of 2021. Reach out to our tax advisors for more specific information. It may be beneficial to make use of the deduction possibilities in 2020 instead of 2021. 

Medical costs

There are deductions for expensive, often non-ordinary, medical costs including expenses arising from sickness or disability or expenses for handicapped close relatives. There are thresholds applicable. 

Alimony allowance payments

Legal obligatory payments relating to some family circumstances such as maintenance payments for a former partner may be deductible.

Life annuity premium payments

Have your pension capital calculated. If it appears that you have a pension gap, it may be beneficial to arrange for a life annuity. Premiums for life annuity capital are tax deductible. 

Mortgage interest expenses

Last but not least, interest payments on mortgage loans to the bank are tax deductible. In the Netherlands, mortgage deductions cover the most substantial personal deduction. In 2020 the mortgage interest paid can be deducted against a (maximum) tax rate of 46%.

Interest payments relating to the financing, renovation, or maintenance of your primary dwelling (often in the Netherlands) may be deducted. Blue Umbrella will help you and calculate the actual benefit. This may be especially relevant in case you have temporarily two residences for example. 

Family banks

Mortgage loans from family members or from your own B.V. or LLC equivalent may be deductible as well. Relevant is that all requirements are met, such as that a mortgage (since 2012) should be fully repaid within 30 years, repaid at least in fixed annuities and at all time proof of payments and details of the loan needs to be supplied to the Dutch Tax Authorities (“DTA”). The rules for interest deduction and timing of the payments are very stringent. 

Reach out to us if you need specific tax optimization of a current or future loan or gifts within your family or company. 

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