Employment Tax Credit Calculator 2026

The Employment Tax Credit: The Netherlands' Biggest Tax Break for Workers

The arbeidskorting (employment tax credit or labour tax credit) is the single most valuable tax credit available to workers in the Netherlands. At its maximum of €5,685 in 2026, it reduces your annual tax bill by nearly €474 per month. For most employed expats and international workers, understanding this credit is essential because it directly determines how much of your salary you actually take home.

The Dutch government introduced the employment tax credit to make working financially more attractive compared to receiving benefits. It creates a clear incentive: the more you earn (up to a point), the larger your credit. But there is a catch -- above a certain income, the credit starts shrinking again. This guide walks you through exactly how the credit is calculated, at what income levels you benefit the most, and what happens as your salary increases.

How the Four Build-Up Phases Work

Unlike simpler tax credits that have a flat amount, the Dutch employment tax credit uses a four-phase formula that builds up and then phases out based on your employment income. Here is how each phase works in 2026:

Phase 1: Income from €0 to €11,965

In this phase, the credit equals 8.324% of your employment income. If you earn €11,965, your credit is €996. This phase covers very low incomes and part-time workers. The build-up is relatively slow -- for every €1,000 you earn, you receive approximately €83 in credit.

Phase 2: Income from €11,965 to €25,845

This is the steep build-up phase. The credit equals €996 plus 31.009% of your income above €11,965. This is where the credit grows rapidly: for every additional €1,000 you earn, the credit increases by approximately €310. By the time you reach €25,845, the credit has grown to €5,300. This phase creates a very strong incentive to move from minimal to moderate employment.

Phase 3: Income from €25,845 to €45,592

The credit continues to grow, but much more slowly. It equals €5,300 plus 1.950% of your income above €25,845. Over this entire range, the credit only increases by €385. At €45,592, the credit reaches its maximum of €5,685. Many workers in this income range barely notice the additional build-up because it is so gradual.

Phase 4: Income above €45,592 (Phase-Out)

Here the credit reverses direction. Starting from the maximum of €5,685, the credit decreases by 6.510% of every euro above €45,592. This means for every additional €1,000 you earn, you lose approximately €65 of your employment tax credit. The credit eventually reaches zero at an income of approximately €132,920.

Step-by-Step Calculation Example

Let us calculate the employment tax credit for an expat earning €60,000 per year. This is a common salary for international professionals in the Netherlands.

• Phase 1: 8.324% x €11,965 = €996
• Phase 2: 31.009% x (€25,845 - €11,965) = 31.009% x €13,880 = €4,304
• Phase 3: 1.950% x (€45,592 - €25,845) = 1.950% x €19,747 = €385
• Subtotal: €996 + €4,304 + €385 = €5,685 (maximum reached)
• Phase-out: 6.510% x (€60,000 - €45,592) = 6.510% x €14,408 = €938
• Final credit: €5,685 - €938 = €4,747

At €60,000, the employment tax credit is €4,747, which translates to approximately €396 per month in lower taxes. Without this credit, your monthly take-home pay would be almost €400 less.

Employment Tax Credit at Every Income Level

Here is a comprehensive table showing the employment tax credit at various income levels in 2026. This helps you see at a glance how much you benefit at your specific salary:

The sweet spot is clear: workers earning between €25,000 and €55,000 get the most benefit from the employment tax credit. At the median Dutch salary (approximately €48,000), you still receive over €5,300 per year.

The Phase-Out Trap: Why Your Marginal Rate Is Higher Than You Think

The 6.51% phase-out of the employment tax credit has an important hidden effect on your actual marginal tax rate. When you earn one additional euro above €45,592, you do not just pay the bracket tax rate on that euro -- you also lose 6.51 cents of your employment tax credit.

Combined with the general tax credit phase-out (6.398%), the actual marginal tax burden at certain income levels can be shockingly high:

Notice the paradox: the highest true marginal rate (56.01%) occurs not at the very highest incomes, but in the €78,426 to €132,920 range, where the top bracket rate combines with the employment credit phase-out. Above €132,920, the marginal rate actually drops to 49.50% because the phase-out is complete.

This means an expat earning €90,000 effectively pays a higher marginal rate on their next euro than someone earning €150,000. It is a well-known quirk of the Dutch tax system and particularly relevant for salary negotiations.

Employment Tax Credit vs. General Tax Credit

These two credits are often confused, so here is a clear comparison:

The key takeaway: the employment tax credit is almost twice as large as the general tax credit and phases out much more slowly. This is why working in the Netherlands is financially more attractive than receiving passive income of the same amount -- the employment credit alone is worth up to €5,685 per year that non-workers do not receive.

Impact on Your Monthly Payslip

As an employee in the Netherlands, the employment tax credit is automatically built into your monthly payroll calculation. Your employer's payroll software divides the annual credit by 12 and applies it each month. Here is what this looks like for three common salary scenarios:

Scenario 1: €36,000 gross per year (€3,000/month)

• Employment tax credit: €5,498/year = €458/month
• Without this credit, your loonheffing would be €458/month higher
• That is the difference between taking home ~€2,350 vs ~€1,890

Scenario 2: €55,000 gross per year (€4,583/month)

• Employment tax credit: €5,072/year = €423/month
• The phase-out has started reducing your credit by about €51/month vs. the maximum
• Net monthly salary approximately €3,500 vs ~€3,080 without the credit

Scenario 3: €85,000 gross per year (€7,083/month)

• Employment tax credit: €3,120/year = €260/month
• Significant phase-out -- you have lost €2,565 of the maximum credit
• Still, this saves you over €3,100 per year compared to having no credit at all

What Happens When Your 30% Ruling Ends

For expats with the 30% ruling, the interaction with the employment tax credit deserves special attention. While the ruling is active, your taxable income is only 70% of your gross salary. The employment tax credit is calculated on this lower taxable income, which can actually work in your favor during the phase-out.

Consider an expat earning €80,000 gross:

• With 30% ruling: taxable income = €56,000, employment credit = ~€5,007
• Without 30% ruling: taxable income = €80,000, employment credit = ~€3,444

When the ruling ends, not only does your taxable income jump by 30%, but your employment tax credit also drops by approximately €1,563. The combined effect accelerates the net income reduction you experience. This is why financial planning before the ruling expires is so critical. Use our 30% ruling comparison tool to model this transition.

The Arbeidskorting for Self-Employed Workers

If you are self-employed in the Netherlands (freelancer, ZZP-er, or business owner), you also qualify for the employment tax credit. Your business profit (winst uit onderneming) counts as employment income for the purpose of this calculation. The credit is applied through your annual income tax return rather than through monthly payroll.

Self-employed workers benefit from additional deductions that employees do not have (the self-employed deduction of €1,200 and the SME profit exemption of 12.7%), but the arbeidskorting is calculated the same way. For a ZZP-er with €60,000 in business profit, the employment credit would be approximately €4,747 -- the same as for an employee.

International Comparison: Employment Credits Across Europe

The Dutch employment tax credit is relatively unique in Europe. Most countries incentivize work through different mechanisms:

• United Kingdom: No direct equivalent. The Personal Allowance (£12,570 tax-free) serves a similar purpose but is not specifically tied to employment. Working Tax Credits exist but are being replaced by Universal Credit.
• Germany: Uses a different approach with higher tax-free thresholds (Grundfreibetrag of €12,084) and tax class optimization for married couples. No separate employment credit exists.
• Belgium: Has a "forfaitaire beroepskosten" (standard professional expenses deduction) rather than a credit. The effect is smaller because it reduces taxable income rather than the tax itself.
• France: Uses the "prime d'activite" -- an employment bonus for low earners. More targeted than the broad Dutch system.

The Dutch approach of a large, income-dependent credit that phases out gradually is considered effective at making work pay across a wide range of incomes. For middle-income expats, this credit is one of the reasons the Netherlands has a lower effective tax rate than the headline bracket rates suggest.

Frequently Asked Questions

Related Calculators

Explore more tools to understand your Dutch tax situation:

• Dutch Salary Calculator -- Calculate your net monthly salary
• All Tax Credits Calculator -- Overview of all Dutch tax credits
• Tax Brackets Calculator -- Understand the three income tax brackets
• Effective Tax Rate Calculator -- See your real average tax rate
• Income Tax Calculator -- Full Box 1, 2, and 3 calculation
• 30% Ruling Comparison -- Compare salary with vs. without the ruling

Sources

The information on this page is based on the following official sources:

• Belastingdienst: Tax credits and employment tax credit
• Belastingdienst: Tax rates and tax credits 2026
• Government of the Netherlands