More mortgage benefits for higher incomes

This article was last updated on November 25, 2024

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More mortgage benefits for higher incomes

Homeowners with a middle income and higher wages will be able to deduct more mortgage interest from their taxes in 2025. For owners with a lower income, the advantage actually becomes smaller. This is evident from the 2025 tax plan, which is discussed by economists’ journal ESB writes.

Home owners are currently allowed to deduct 36.97 percent of the mortgage interest paid from the amount on which they have to pay income tax. For higher incomes this will increase by half a percentage point in 2025.

Extra disk

The increase is related to a change in income tax. The tax authorities currently still work with two tax brackets. If your salary is more than 75,518 euros per year, you pay the high rate (49.5 percent). Anyone who earns less than that pays the low rate (36.97 percent). The percentage of the lowest rate is now equal to the percentage of the mortgage interest deduction.

From next year, an additional income tax rate will be added. The highest rate remains the same and the lowest rate decreases slightly to 35.82 percent. In between, there will be a middle rate: anyone who earns between 38,098 and 75,518 euros per year will pay 37.48 percent tax on his or her salary.

For that middle group, the tax benefit increases with that tax rate. Those who fall under the lowest rate can actually deduct less mortgage interest.

Inequality

It is striking that the tax benefit for this group is increasing because the mortgage interest deduction has been phased out since 2013. The European Union and De Nederlandsche Bank have been putting pressure on the Netherlands for years to abolish this advantage. The deduction means that house seekers can borrow a higher amount and thus contributes to a higher house price.

The tax law still has to pass the Senate. In the trade journal ESB, economist Raymond Gradus calls for the measure to be scrutinized. “This is downright unwise. While the government says it wants to make the owner-occupied housing market more accessible and affordable, for the first time since 2013 the mortgage interest deduction rate for high incomes will not go down but up.”