Tax deduction of a loan

The legislator provides for tax provisions that make it possible to reduce the burden of a mortgage loan. There is a difference between the gross burden of a mortgage loan and the net amount that you will ultimately spend on it. It is important to bear in mind that you must meet the conditions to be eligible for the deduction.

Note: The deduction does not mean that you pay less interest or repayment! You pay less tax, so the net costs are lower.

Changes as of January 1, 2005

bank loan

Since January 1, 2005, the rules regarding the tax deduction have been greatly simplified. Old loans and refinancing will in many cases still fall under the old rules. Under the new scheme, both the interest, the capital repayments and any debt balance premiums fall under the tax deduction. There is a maximum amount of $ 1,500 per person per year. The amount is indexed annually and if there are three or more dependent children, it is possible to have the maximum amount to be deducted increased. In this way the government makes it easier to purchase a home.

Conditions for deduction

loan deduction

In order to be eligible for the tax deduction of the costs for the loan, you must meet two conditions. It must first of all be a mortgage loan that is taken out with a European institution. The term of the loan must be at least 10 years, although this will usually not be a problem with a mortgage loan. In addition, the loan must have been taken out to acquire a home or be able to retain it and this must be the only home of the taxpayer on 31 December of the year in which the loan was taken out.

Debt balance insurance

Debt balance insurance

In the case of a balance insurance, the premiums can generally also be deducted. However, keep in mind that additional conditions are set with regard to this insurance. That is something your mortgage lender can tell you more about.

The tax deduction possibilities only apply to mortgage loans, since other loans (such as consumer loans) do not meet the first condition. In addition, keep in mind that you need to have the amount available monthly to pay your interest and any repayment and you will only benefit when paying the taxes.