Tax divorce and house is a subject that is always a tense subject, nevertheless it needs attention.
A divorce has many consequences, one of them is that one of the partners will leave the house at some point, if the other partner would like to stay in the house. If the house is purchased by both partners, the house is in Box 1 and the costs related to the mortgage can be deducted.
The condition to be able to deduct the mortgage interest is that the house is the main residence. If one of the partners leaves the house, then the house is no longer the main residence. Often the partner staying behind in the house takes over the 100% of the mortgage obligations.
Only 50% mortgage deduction
Tax wise we have a problem. We can only assume the house is not immediately transferred via a notary in name of the partner staying behind, a period is need to make the legal arrangements. For that period the one partner can pay 100% of the mortgage, but as this partner only owns 50% of the house, only 50% of the mortgage costs can be deducted.
In the situation that the partner staying behind cannot take over the mortgage and full ownership of the house simply because not enough income is earned by this single partner, for that period of time only 50% of the mortgage costs can be deducted.
The situation can be even worse. If the income earning partner, let us assume the well earning wife moves out and the stay at home dad continues to live in the house, then the situation is not good. The person able to pay for the mortgage cannot deduct anything, as the house is no longer the main residence of this partner.
In the latter situation we recommend to organize through the proper channels, not between the partners only, that alimony is due to be paid to the ex-partner. So not alimony for the children. This partner alimony is taxed with the partner staying behind. As this partner now has been transferred the full house, the partner can deduct 100% of the mortgage costs, which is set off against the alimony income.
Divorce and joint tax return
The above situation where a partner leaves the house, time going by to have the house legally transferred to the other partner can cost tax deduction, as I explained above. The Dutch tax office offers the one time solutions to file in the year of divorce still as joint tax partners one tax return.
This solution makes that either partner can deduct to the maximum potential the mortgage costs. We understand that you definitely do not want to have contact again with your ex about, but sometimes you need to act business wise and do what is best for both.
Orange Tax – Tax is exciting!
Although we think tax is exciting, a divorce we never think is exciting. A divorce implies many aspects to take into account and in the above article we only focused on one. Basically the message is: file the tax return in the year of divorce jointly to make your tax life a little easier.