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Dutch Tax Tips: Deductible costs on the 2012 tax return

In the latest article we discussed the 2012 income tax return in the Netherlands. As a reminder, filing needs to be done:
- before April 1 for resident taxpayers
- before July 1 for non-resident taxpayers

In this article we would like to give you some tax return tips which could reduce your taxable income and save you money.

Declaration tips & deductible costs

Below you will find the 3 most important declaration tips / deductible costs for 2012:

 Mortgage interest & deductible costs for buying a house in the Netherlands

The most discussed and interesting deductible cost to be introduced to the Dutch tax system in years is the mortgage interest deduction.

The government amended the legislation on some points as of January 1, 2013 but in general all mortgage interest is deductible from your taxable income if you closed your mortgage before 2013.

If you closed the mortgage on or after January 1, 2013 the interest is only deductible if the mortgage is not redemption-free. In other words: if the loan repayments made have a principal and interest portion. If your income is in the highest tax bracket, costs are deductible up to 52%.

Apart from the mortgage interest, there are many other costs related to purchasing property which are also tax deductible such as mortgage advisory, notary and property valuation costs. However, there are other costs (e.g. real estate agent costs) which are not.

 Specific healthcare costs

If you had incurred healthcare costs in 2012, some of them could be deductible. These include medicines prescribed by your doctor, healthcare devices (wheelchairs for example) or travel costs to the hospital. Whether these costs are deductible or not depends on a threshold which is related to your gross income.

 Study costs

The Dutch government encourages studying by making the costs deductible in the income tax return. This means that the expenses incurred for study geared towards a future profession are deductible up to a maximum of 15.000 euros.

There is however a threshold of 500 euros and as expected, study costs which are for personal hobbies are not deductible. For example, if you take a photography course with no intention of becoming a professional photographer you are not able to deduct these costs.

To conclude, this article is not a complete overview of all deductible costs but it can give you an idea of how the complex Dutch tax system works.

The important thing to keep in mind is that your taxable income can be reduced, and we strongly advise you to ask a trustworthy tax advisor on how to achieve this!
 

Nico Koppel is an Expat Service Provider, who specialises in tax advice & accountancy. For more information, please comment below or visit Koppel Tax Consultants.

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