Refurbishments of my house and tax is possible a topic that has crossed your mind at one moment of time. Let me bring you back to that moment.
Refurbishments of my house and tax
In your process of purchasing a property in the Netherlands to be used as you main residence, we can only doubt it was instantly to your taste. So many people have some many design inputs. At one time in the mid-seventies Cork was hot. Believe it or not, it still shows sometimes. Then we had the paneling era, you might have seen that as well.
From the kitchen it was obvious to you that the previous owner thought about selling for a long time already. And the bathroom you ever wondered how they used it, to have your imagination stop instantly. You have your own view on what is design and comfort. There is work to do and work is costsly.
Can I get a tax break on refurbishments?
Yes and no, the universal answer. The true answer is no, you cannot. Where comes the yes from? As you in the meanwhile figured out, refurbishments can be costly and not everybody has funds available. In coordination with your mortgage advisor you can agree on taking up a so called depot from the mortgage bank.
A mortgage depot
The mortgage depot is in fact an amount of funds made available. You can only touch the depot if you provide a solid invoice for the refurbishment work to be done. The mortgage bank will then make available that amount of money. The depot can fully be used, or if the depot was more than required, you ask to terminate the depot.
Terminating the depot? Free money you give back. That is indeed the catch, nothing is free from the mortgage bank. You do pay interest over the depot for the period of time it is at your deposal. You might think that is annoying as the builder still takes six months to get the permits in and during that time I pay interest over the deposit I cannot use. That is not entirely correct. The mortgage bank is aware you have not used the depot or all of the depot and reimburses you interest for that period of time.
The interest on the loan taken out to pay for the refurbishments are tax deductible. The refurbishments on their own are not tax deductible. That implies the interest paid over the depot is tax deductible. That said, you need to compensate the paid interest with the received interest for the period of time the depot was not fully used yet.
Is it wise from investment point of view to do refurbishments?
Again a universal answer, yes and no. No in case there is now a doable kitchen, but in the color blue and you would like to convert it into pink. Then the refurbishment will not yield more than approximately EUR 5.000 for updated appliances, but your investment could be over EUR 20.000. Even worse, not a lot of people would like to purchase your house with a pink kitchen, so it could even be a negative investment.
The answer is yes when you invest in HR plus plus glassing or improve the roof, replace very dated kitchen, bathroom. If you even put in some green solutions and isolation, that all builds to an increased value. You could also state the previous owner did not do enough maintenance, so by you doing it now, you are able to maintain the value of the house at least.
Tax is exciting
We think tax is exciting. We also have the opinion that refurbishing your house will improve your quality of life. If we can then help you claim back the interest you paid over the loan you took out for these refurbishments, we are eager to assist you.