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Mortgage interest deduction – living abroad

If you own a house abroad, can the mortgage deduction being deducted from the Dutch taxable income? This is possible when the concerning person is working in the Netherlands, generates his or her income for at least 90% in the Netherlands and choses to be regarded a Dutch resident tax payer. Then the mortgage interest can be deducted in the Dutch income tax return.

The requirement that the house is the main residence still stands, that implies that this possibility is applicable to persons living in Belgium and Germany.

If you live abroad, but you own a house in the Netherlands, than the house is no longer your main residence. That implies the mortgage interest cannot be deducted. This is only different when the house use to be your main residence and is now up for selling. During a maximum period of two years you can deduct the mortgage interest. That is only possible when the house is empty, not being rented. As you live abroad, you will not have Dutch taxable income over the years, hence the mortgage deduction is compensated with the most recent year in which you had taxable income.

If you live abroad and you have rented the house or the house was already not your main residence when you left, then you cannot deduct the mortgage interest. You do need to file the Dutch personal income tax return. Based on the tax treaties real estate is taxed in the country where it is situated. So you have to file the house in Box 3. There the economic value set by the tax office reduced with the mortgage debt is taxed at 1.2% Dutch income tax. The rental income you do not report and the costs related to the house you cannot deduct. If the rental agreement is such that the agreement cannot be terminated before the end of the period mentioned in the rental contract and the rental income is not very high, you can set the economic value at 85%. The result is, in the current housing market, that no Dutch income tax is due.

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