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Box 3 income tax due, how can you reduce the taxable base?

If you own in 2013 on January 1 more than EUR 21.139 and for fiscal partners more than EUR 42.278 in world wide assets, you have to report your world wide wealth in the 2013 income tax return. This is the Box 3 taxation or wealth taxation. Can this taxable base be reduced?

Basically that is not possible with nominal values such as money in the bank and shares/ bonds/stocks in the overview provided by the bank. Other items, such as a second home or your only home rented out, reported in Box 3 of that the value can be adjusted.

Real estate values of properties situated in the Netherlands are reported by the counties. So each house or apartment its value is registered, this is the so called WOZ value. In the situation that you rent out the house, then the value is less, because tenant make the house less easy saleable. If then also the rental income is not too high and the rental agreements contain certain criteria, you can reduce the value to a maximum reduction of 85% of the WOZ value. This reduction in connection with the mortgage on the house can make you drop under the threshold of EUR 21.139 (EUR 42.278).

If you have only the home you are living in and due to circumstances (inheritance or bonus from work, lottery) you have a substantial amount on your bank account, you can decide to pay of the mortgage loan. The Box 3 taxable base is then converted into a Box 1 repayment of a loan, hence less taxable base in Box 3. The result is that you pay less mortgage interest, hence less tax back and you pay no or less Box 3 tax. The other side of the story is that you also have less money to invest in projects, shares or bonds that might yield more income in the future than the reductions realized now. This is a financial decision outside the scope of this blog.

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