Mortgage Interest Deduction 2026

Understanding Mortgage Interest Deduction in the Netherlands

The Dutch mortgage interest deduction (hypotheekrenteaftrek) is one of the most valuable tax benefits available to homeowners in the Netherlands. For expats and international workers who have purchased or are considering purchasing property, understanding this deduction can save you thousands of euros annually and significantly reduce the effective cost of your mortgage. However, the interaction between this deduction, the eigenwoningforfait (imputed rental value), and the 30% ruling creates complexity that many international workers find challenging to navigate.

At its core, the system works like this: the interest you pay on your mortgage for your primary residence can be deducted from your taxable income in Box 1 of the Dutch tax system. In return, you must add a small percentage of your home's WOZ value (the eigenwoningforfait) to your income. The net difference between your interest deduction and the eigenwoningforfait determines your actual tax benefit. For most homeowners with a mortgage, the interest deduction far exceeds the eigenwoningforfait, resulting in a net tax advantage.

How the Deduction Works in Box 1

The Dutch income tax system divides income into three "boxes." Your salary and mortgage interest deduction both fall under Box 1 (income from work and home). When you own a home with a mortgage, two things happen in your tax return:

1. Addition: the eigenwoningforfait (a percentage of your WOZ value) is added to your taxable income as deemed income from homeownership.
2. Deduction: the total mortgage interest paid during the year is subtracted from your taxable income.

The net effect is usually negative, meaning your taxable income decreases, which leads to a lower tax bill or a tax refund. The tax benefit is calculated at the applicable marginal rate, capped at 37.56% in 2026. This cap applies even if your marginal tax rate in the top bracket is 49.50%.

Detailed example: suppose you purchased a property for €425,000 with a €425,000 annuity mortgage at 4% interest. In the first year, you pay approximately €17,000 in mortgage interest. Your property has a WOZ value of €420,000, so the eigenwoningforfait is €420,000 x 0.35% = €1,470. Your net deductible amount is €17,000 - €1,470 = €15,530. At the maximum deduction rate of 37.56%, your tax benefit is €15,530 x 37.56% = €5,831 per year, or approximately €486 per month. This effectively reduces your monthly housing cost from approximately €2,028 (gross mortgage payment) to around €1,542 net.

Requirements for Mortgage Interest Deduction

Not every mortgage qualifies for interest deduction. The Dutch tax authority (Belastingdienst) has strict requirements that you must meet:

1. Primary Residence Only

The deduction applies exclusively to the mortgage on your primary residence (eigen woning). If you own a second home, a holiday house, or an investment property, the mortgage interest on those properties is not deductible in Box 1. Investment properties fall under Box 3 (wealth tax) instead.

For expats, this means that if you maintain a property in your home country while owning a home in the Netherlands, only the Dutch property (assuming it is your primary residence) qualifies for the deduction.

2. Annuity or Linear Mortgage

For mortgages taken out after January 1, 2013, the loan must be structured as either an annuity mortgage (annuiteitenhypotheek) or a linear mortgage (lineaire hypotheek). Both types require full repayment within the mortgage term. Interest-only mortgages (aflossingsvrij) do not qualify for the deduction. This requirement was introduced to ensure that homeowners actually build equity over time, reducing systemic risk in the housing market.

If you took out your mortgage before 2013, transitional rules may apply. Older interest-only mortgages that were taken out before this date may still qualify for the deduction under the old rules.

3. Maximum 30-Year Deduction Period

You can deduct mortgage interest for a maximum of 30 years per loan. This 30-year clock starts when the loan is originated and continues even during periods when you are not living in the property (for example, during a temporary assignment abroad). Once the 30 years expire, you lose the deduction even if you still have an outstanding mortgage balance.

When you move to a new property and take out a new mortgage, a new 30-year period begins for the new loan portion. However, if you roll over part of your old mortgage (for example, through a "bijleenregeling" scenario), the original clock continues for that portion.

The Eigenwoningforfait: What You Add Back

The eigenwoningforfait is the flip side of the mortgage interest deduction. It represents the Dutch government's view that owning a home provides an economic benefit (essentially, free housing) that should be taxed. The eigenwoningforfait is calculated as a percentage of your property's WOZ value (Waardering Onroerende Zaken), which is assessed annually by your municipality.

In 2026, the following rates apply:

For the majority of homeowners, the relevant rate is 0.35%. At typical Dutch property values, this translates to the following annual additions:

The WOZ Value: Why It Matters

The WOZ value (Waardering Onroerende Zaken) is a government-assessed property value that is determined annually by your municipality. It is used not only for the eigenwoningforfait but also for local property taxes (onroerendezaakbelasting or OZB) and water board charges. The WOZ value is typically based on comparable sales in your neighborhood as of January 1 of the previous year.

As an expat, you should be aware that you have the right to object to your WOZ value if you believe it is too high. This can be done within six weeks of receiving your WOZ assessment (usually in February or March). A lower WOZ value means a lower eigenwoningforfait, which increases your net mortgage interest deduction. Many commercial services will contest your WOZ value on a no-win-no-fee basis.

The 30% Ruling and Mortgage Interest Deduction: A Critical Interaction

This section is essential reading for any expat with the 30% ruling who owns or plans to own property in the Netherlands. The interaction between the 30% ruling and mortgage interest deduction is one of the most misunderstood aspects of Dutch expat taxation.

The fundamental rule: you cannot combine the full benefit of both the 30% ruling and the mortgage interest deduction. The 30% ruling provides a tax-free allowance intended to cover extraterritorial costs, which include housing costs. To then also deduct mortgage interest on the same housing would constitute double-dipping.

In practice, this means the mortgage interest deduction can only be applied against the taxable portion (70%) of your income. The effective tax benefit is therefore lower than for someone without the 30% ruling.

Scenario comparison: consider two colleagues, both earning €80,000 gross per year, both with a €400,000 mortgage at 4% interest (€16,000 annual interest). Colleague A has no 30% ruling; Colleague B has the 30% ruling.

• Colleague A (no 30% ruling): deducts €16,000 interest minus eigenwoningforfait from full income. Tax benefit at 37.56%: approximately €5,475 per year.
• Colleague B (30% ruling): taxable income is only €56,000. The mortgage interest deduction applies only against this lower taxable base. Additionally, Colleague B already receives approximately €7,000-9,000 per year in net tax savings from the 30% ruling itself. The combined tax position is still favorable, but the mortgage interest deduction benefit is significantly reduced.

Important consideration: when the 30% ruling expires (after a maximum of 5 years), your mortgage interest deduction kicks in at full value. Many expats find that the financial transition from the 30% ruling to standard taxation is softer than expected because the mortgage interest deduction partially compensates for the lost tax benefit.

How to Claim the Deduction on Your Tax Return

Claiming mortgage interest deduction requires filing an annual income tax return (aangifte inkomstenbelasting). Here is the step-by-step process for expats:

1. Receive your annual mortgage statement: your bank sends a jaaropgave (annual statement) in January or February, detailing the total interest paid and the outstanding mortgage balance as of December 31. This information is also automatically shared with the Belastingdienst.
2. Note your WOZ value: your municipality sends a WOZ assessment (WOZ-beschikking) in February or March. You need this value for the eigenwoningforfait calculation.
3. File your tax return: log into the Belastingdienst website using your DigiD. Navigate to the "eigen woning" (own home) section. Much of the data will be pre-filled from your bank's report.
4. Enter property details: confirm or enter your WOZ value, mortgage details, and ownership percentage (if you co-own with a partner).
5. Review and submit: the system automatically calculates your net deduction (mortgage interest minus eigenwoningforfait) and shows the resulting tax benefit or refund.

The filing deadline is typically May 1 of the following year. If your employer has been applying the mortgage interest deduction through your monthly payroll (voorlopige teruggaaf), the annual return settles any differences.

Tip for expats: consider applying for a provisional refund (voorlopige teruggaaf) so you receive the mortgage interest deduction benefit monthly rather than as a lump sum after filing your annual return. This improves your monthly cash flow. You can apply through the Belastingdienst website.

Future of the Mortgage Interest Deduction

The Dutch mortgage interest deduction has been a politically contentious topic for decades. Critics argue it inflates housing prices and disproportionately benefits higher-income homeowners. Supporters contend it makes homeownership accessible and provides economic stability.

The deduction rate has been gradually reduced from 52% to the current 37.56%. As of 2026, there are no concrete plans for further reductions, but the political landscape can shift. For expats making long-term property decisions, it is prudent to consider the possibility that the deduction could be further reduced or restructured in the future. When calculating whether to buy, do not rely entirely on the deduction; treat it as a bonus rather than a core part of your housing budget.

Practical Tips for Maximizing Your Deduction

• Choose an annuity or linear mortgage: only these types qualify for interest deduction. An annuity mortgage provides maximum interest deduction in the early years when your interest payments are highest.
• Contest your WOZ value: a lower WOZ value means a lower eigenwoningforfait, increasing your net deduction. Services like WOZ-verlaging or Eerlijk WOZ handle objections on a no-win-no-fee basis.
• Apply for a provisional refund: receive your deduction benefit monthly instead of waiting for the annual tax return. This improves monthly cash flow by several hundred euros.
• Time your 30% ruling carefully: if you are buying property near the end of your 30% ruling period, the full mortgage interest deduction will soon kick in, making the purchase even more financially attractive.
• Keep records of improvements: capital improvements to your home can increase its base value and may affect your tax position when you eventually sell.
• Consider the bijleenregeling: if you sell your current home at a profit and buy a new one, the equity from the sale must be reinvested. The portion financed with equity does not qualify for interest deduction on the new mortgage.

Frequently Asked Questions

Sources

• Belastingdienst: Mortgage Interest Deduction
• Government of the Netherlands: Hypotheekrenteaftrek
• NIBUD - National Institute for Budget Information