That is the headline used by several news outlets, with the addition “for higher incomes“. What is going on?
Additional tariff bracket
The tax plan regulates that from 1 January 2025, tax on income from work and living (box 1) will be levied over 3 brackets (there are currently 2). From 2025, the rate structure for box 1 will be as follows:
| Income | ||
| From | To | Rate |
| € 0 | € 38.441 | 35,82% |
| € 38.441 | € 76.817 | 37,48% |
| € 76.817 | - | 49,50% |
For several years, deductions in Box 1, including mortgage interest, have no longer been securitised at the highest rate (49.5%), but at the lowest rate. With the introduction of an additional bracket, it has been stipulated that deductions will also be securitised at the rate of the second bracket. This means that from 2025, for incomes in Box 1 above €38,441, deductions will be effected at 37,48%, where in 2024 that will still be against 36,97% was. Hence, a 0.51%-point increase in the deduction rate.
Also for other deductions
Incidentally, this applies not only to mortgage interest deductions, but also to the other so-called base-reducing items:
- self-employment deduction and cessation deduction;
- SME profit exemption;
- TBS exemption;
- personal deductions (maintenance obligations, specific care costs, weekend disability expenses and gifts).