Buying a house and tax-deductible costs
One perk of living in the Netherlands is that if you are able to buy a house, there are various tax advantages to help save a little money.
Expats who are living in the country long-term may be advised that if their monthly rent is above a certain level – even with the high house prices – it may still be cheaper to pay ‘rent’ to a mortgage provider and buy. Another advantage is that you may well be able to get a 100% mortgage and deduct some of the annual interest payments from your income tax.
When you actually buy a house, we often have requests about which costs linked to the transaction are tax deductible. Costs that are linked to the financial product for buying the house are tax deductible, but some of the costs when you go to the notary are not.”
Typically, when you buy a house, the notary does two things for you: organises the transfer act so that all issues and complexities are declared by the seller and then the property is legally transferred. The second is to set up the mortgage agreement with your bank, and these costs are deductible, and will be separated out in the bill from the notary.
Other bills related to getting the mortgage can be offset from your income too. The interest part of the mortgage payments is partly deductible and so is any advice that you have received from a mortgage adviser. So is the official valuation, or taxatie in Dutch, which the mortgage lender requires in order to know that the asset is worth what you are paying.”
Beware, though: if you are a foreigner and are legally required to have a translator for the housing acts, this will not be tax deductible unless the translator bills you separately for translating for the mortgage part of the meeting (which can be offset) and the house transfer part (which cannot). Also, if you choose to do your own building survey on a house – which is definitely to be recommended – this cannot be offset. The costs for any buying agent that you use, again, are not related to the mortgage so cannot be put against income in your next tax return.
If you sign a sale contract, you will be asked either to put a downpayment of 10% or a guarantee from the mortgage broker that they will cover this cost – which is forfeited if you breach the contract. Unfortunately, any costs involved in doing this are not considered mortgage related costs, because they are incurred so that you can buy the house.
All of the allowable bills can be declared once in the tax return that relates to the year in which you paid them and – good to know – they are also acceptable if your loan is to improve or maintain a property.