The study cost deduction in the income tax return will end this year (2021). How does the study cost deduction work?
Study cost deduction
If you pay yourself a study that aims at a better financial position, you make study costs that are tax deductible. If you make for instance study costs to learn the Dutch language, or other language, even Japanese, that is not accepted as tax deductible study cost.
The study costs need to have been paid by yourself, or your tax partner. If your parents or somebody else paid for the costs, you have as a matter of fact no costs. If you have no costs, you cannot deduct any.
Study costs and tax residence
The study costs need to have been made while you were a Dutch tax resident. If you already paid study costs while you lived abroad, then you need to deduct these costs abroad. Even if you cannot deduct study costs abroad, you cannot deduct them in the Netherlands.
How to deduct the study costs
Often we are contacted in the year the student finally has income and asks to deduct the study costs made in previous years. That is not how it works.
If you make study costs in for instance 2019, you need to file a 2019 income tax return in which you deduct the study costs. The outcome of that tax return is a negative income.
When you have a taxable income in 2020 automatically the 2019 negative outcome of the tax return is set off against the positive 2020 income. That is how the study costs refund is processed.
What if you do it wrong?
Should you be stubborn and you still deduct 2019 study costs in the 2020 tax return, you will have a problem. The problem is not immediate, but the problem will arise two years later. The tax office checks always these tax returns and demands to see the invoices, proof of payment and what the study was for. If you then show 2019 costs in the 2020 tax return, the tax refund needs to be paid back.
A tax refund you probably already spend. Of course you can solve that by still filing the 2019 income tax return, but when you file a tax return a substantial period after the year actually ended, will go slow.
2021 the final year
2021 will not be the final year for persons to pay for study costs. But 2021 is the final year in which you can deduct the study costs in the income tax return. How exactly future study costs are processed is unknown to us yet.
Tax-is-Exciting and some studies can be exciting too. The deduction being terminated at the end of 2021 is not exciting at all. Important is that you claim back the costs already made. Please contact us for assistance.