How to deduct the renovation cost of your monumental building
Broadstreet has been advising professionals, entrepreneurs and expats on reaching their personal and financial goals for over 25 years. In this article, they explain how tax works on your worldwide assets.
In Amsterdam, The Hague, Utrecht and other Dutch cities there are many houses that are classified by the government as being of historical and cultural value. The Netherlands has almost 62.000 rijksmonumenten, of which almost half are monumental homes.
And while owning such a historic home brings with it some responsibilities and limits on how much you can change the exterior of the building, it also comes with some advantages when tax season comes around. That’s of course aside from enjoying life in a beautiful building that’s part of Dutch history!
Tax deductions for monumental houses
If you own a monumental home, expenses you incur may qualify as tax deductible expenses on your income tax return.
This deduction only applies to monuments listed in the national monuments and historic buildings register as a rijksmonument, or national heritage site of the Netherlands.
A distinction between "cost of improvement" and "maintenance costs" needs to be made, because only the latter can be deducted. Maintenance cost could also mean the cost of renovation of a building, as long as nothing is added on or changed.
80 percent of maintenance costs deductable
As of 2012, only 80 percent of the costs qualifying as maintenance costs are tax deductible. Other things such as insurance, water and property tax and the depreciation of the building can no longer be deducted.
Tax partner and deductions
The expenses are deductible in the year of payment of the expenses. If you have a tax partner you can distribute the deduction the way you choose to, in order to optimise the tax effect of the deduction.
Box order and carry forward
Claiming deductible expenses will have an impact on your tax return. The deductible expenses lower your income in box 1. If the expenses exceed your box 1 income, they will lower your box 3 income.
If you still have deductible expenses left, your box 2 income will be lowered. If you still have expenses left to offset, it will be carried forward to the following year.
Asking for pre-approval
In case you plan to have a substantial renovation and you want to have certainty beforehand that the costs are tax deductible, you can request a pre-approval from the tax authorities. The pre-approval will need to take place before you start the renovations.
Advice and checklist
It is important you keep detailed financial records of the renovations and that you document the work and costs properly. The tax authorities will most certainly check the deductibility of your claimed expenses.
It is recommended that you keep the following documents and data:
› copy of the registration of the monument in the special registration for monumental buildings
› land registry details of the monument
› copy of your bank statements showing the (time of) payment of the expenses
› construction drawings before and after renovation
› description, specifications and photos of the renovation
› all information on subsidies you may have received
Looking for guidance on how to file your taxes in the Netherlands? Contact Patricia van der Hut, a partner at Broadstreet, providing specialist tax and accountancy services to expats.
Previously under the name Finsens, the tax, accountancy and payroll divisions were renamed Broadstreet in 2016.
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