Termination registered partnership and mortgage deduction can have an impact on your liquidity flow if done incorrectly. What is this about?
In the Netherlands you are tax partners when you are:
– married, or
– registered partners, or
– both own the house that is your main residence, or
– have children together, or
– are mentioned on each other pension insurance as beneficiary
Tax partners and mortgage deduction
Tax partners can chose who deducts the mortgage interest. If the one partner owns the house and has the mortgage in his or her name. The tax return of the other partner can yield a higher tax credit. Tax partners can choose who deducts what.
Till 2020 it was always the highest earning tax partner that could claim the highest mortgage refund. Since then a lot has changed and per partner it needs to be checked who can claim the most. It is possible that is not the highest earning tax partner. So exciting!
Ending tax partnership
In the event the couple have a divorce or terminate the registered partnership, the couple is no longer each other tax partner. This could be inconvenient from a tax point of view, hence the Dutch tax office offers to opt to remain tax partners during the full tax year, in which the couple are separating. Regardless how long they are both registered at the same address.
Termination registered partnership and mortgage deduction – court case
A couple terminated the partnership mid year. She owned the house and mortgage. He claimed back the tax credit, which was paid in the mutual bank account.
They did not opt to remain tax partner for that full year. The tax office corrected his tax return as too much mortgage deduction was claimed.
He went to court, he even appealed in the higher court. In both cases he lost, as the rules are very clear. No tax partners, no tax credits from the other partner.
We think tax-is-exciting. Separating is not, or for some is very much exciting or a relief. That is emotion, tax is business. If you can come to terms where you look at the tax return business wise, some tax credits can be obtained or saved. However, if there is so much distrust and arguments going back and forth, the costs of paying more tax is the price of relief.