The tax rules relating to the owner-occupied home have now become (far too) complicated. And they regularly lead to strange outcomes. With a in a decision Following the approval recorded on 30 January 2018, State Secretary Snel of Finance has rectified one of those unusual outcomes.
Past
You may invoke this decision with effect from the 2013 tax year. However, the income tax assessments for 2013 (and most subsequent years) have long since been finalised. The Tax and Customs Administration must grant a legally valid request for a reduction in a final assessment if you have submitted that request within 5 years. Your request for a reduction in your 2013 tax assessment must therefore by 31 December 2018 at the latest received by the tax authorities. You have a little more time for the following years.
As mentioned, the issue is quite complex. It concerns situations in which a person buys a new home jointly with a partner and one (or both) of the partners has a tax history relating to a previous home. Under the statutory rules, this may mean that not all the interest paid on the mortgage for the home can be deducted in Box 1. However, under the new approval, this may now be possible after all. If you are eligible, this could result in a substantial additional income tax refund.
You will need to take action yourself by submitting a request to the tax authorities.
Jointly-owned home
The decision contains an example that illustrates the issue. X and Y are partners. They purchase a new property together for €200,000, in the ratio 50%/50%. The purchase of the property is financed by loans totalling €150,000 (of which €100,000 is interest-only) and €50,000 of their own funds. For the purposes of the owner-occupied property scheme, each partner is assessed individually. Each is deemed to have purchased a new home for €100,000. Each is deemed to have financed this with a loan of €75,000 and €25,000 of their own funds.
However, one of the partners has owned a property in the past. And that is the source of the “trouble”, which means that neither partner is allowed to claim full tax relief on the interest.
The partner with a history of home ownership has a home ownership allowance of €50,000. As a result, interest on only €50,000 of the loans is deductible as mortgage interest on the owner-occupied home. The remaining €25,000 of the debt attributed to this partner (€75,000 – €50,000) is included in Box 3.
The other partner cannot make use of the transitional arrangement under which interest on interest-only loans remains deductible after 1 January 2013. For that partner, only the interest on their share of the loan being repaid (50% of €50,000) is deductible. The interest on the part of the interest-only loan is not deductible. This loan (€50,000) is included in box 3.
The provision in the decree rectifies this unusual outcome. Under the decree, both partners in this example are nevertheless entitled to deduct the interest on their full share of the loans as interest on their own home (Box 1).
VWGNijhof
Not sure whether the above applies to your own home? Or do you need help with submitting the application? VWGNijhof is happy to take care of everything for you.