Dutch Tax Tips: Deductible costs on the tax return

In the last article we talked about deductible costs on the 2012 income tax return, and more specifically, about the mortgage interest deduction, deductible medical expenses and educational expenses.

In this article we will discuss other costs that are deducted and audit topics of the Dutch tax authorities.

Personal allowance

Every year you can deduct certain costs including alimony, gifts, medical and educational expenses, from your taxable income. This deduction will:
› be deducted from your taxable income in Box I
› the remaining is deducted from your income Box III, and
› finally on your income in Box II

Please note that you can always take the remaining amount of the deduction forward to the next year.

Deductions between tax partners

If you have a (tax) partner you must take into consideration the fact that deductions also apply to both of you jointly. Put simply, you should allocate the deductible costs based on who must pay the highest rate of income tax. We advise you to consult a trustworthy tax advisor on this issue.

Gifts deduction planning

A gift to a public interest (ANBI) can be deducted from your taxable income too, and, as a rule, you can claim a maximum of 10% of your total income for donations.

However you should also take into account that there is a threshold to donations: you must donate a minimum of 60 euros and 1 percent of your total income.

To give you an example: if you have a total income of 40.000 euros and you donate 1.000 euros to ANBI's:
› the excess above 1 percent of the 40.000 is 400
› so 600 euros (i.e. 1000 minus the threshold of 400) are deductible

Entitled to allowances

If your total deductible costs are low, remember that you may be able to apply for certain benefits (e.g. housing benefit, childcare allowance, healthcare allowance etc.), given that your taxable income is low.

Also, note that the retroactive claiming of childcare allowance is subject to a time limit, whereas healthcare and housing allowance have a broader time range.

If you have requested an allowance, it will automatically run into the following year. Consequently, if your situation or income changes next year, you have to adjust to avoid paying back the money you have received.

Additional inspection by the Dutch tax authorities

Each year the Dutch tax authorities announce "audit topics," which are specific points / areas that the authorities will pay extra attentions to.

For 2012, the audit topics are:
› increase of the mortgage
› the deduction of annuity premiums
› the deduction of medical expenses

In our next article we will talk about Dutch income and foreign income in the Netherlands.
 

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