The tax plans for 2021 do not include any changes to the rules on the owner-occupied home. However, there are changes resulting from previous legislative amendments.
Addition
The percentage of the additional tax liability will be reduced in 2021 from 0.6% to 0.5%. Whether the additional tax liability will also be lower in 2021 naturally depends on the increase in your home’s WOZ value. The local authority will notify you of this value in early 2021.
The additional tax liability for the portion of the WOZ value above €1,110,000 remains unchanged: 2.35%.
Deduction rate
From 2020, tax deductions, such as those relating to the owner-occupied home, will no longer be deducted at the higher rate (49.5%). This will be phased out, with deductions eventually being made at the lower rate (37.1%).
In 2020, tax deductions will be calculated at a rate of 46%. This will be reduced to 43% in 2021.
It may be worth bringing forward the tax deduction for interest on your mortgage. You can do this by paying the interest in advance, or by paying an early repayment penalty when you refinance your mortgage.
No or limited mortgage debt
Until 2019, those with no or only limited mortgage debt did not pay tax on their own home. The tax addition for the benefit of living in the home was offset by a deduction of the same amount (also known as the Hillen deduction).
This scheme is being phased out. In 2021, the housing allowance will amount to just 90% of the owner-occupied home balance (2020: 93%).
Suppose you have a debt-free home with a WOZ value of €250,000. In that case, the amount you must add for your enjoyment of the property in 2021 is: 0.5% * €250,000 = €1,250. The housing allowance amounts to 90% * €1,250 = €1,125. On balance, the amount added to your income for your own home in 2021 is: €1,250 -/- €1,125 = €125.
Transfer tax
The tax plans for 2021 do, however, change the stamp duty. This is important if you are buying your own home. The stamp duty rate will be increased from 6% to 8%
However, there will be a one-off exemption for first-time buyers aged between 18 and 35.
The 2% rate will apply in fewer cases.
See also our factsheet Transfer tax rate.
Tax-exempt gifts
A substantial amount can be gifted tax-free for the purpose of purchasing a home. The “jubelton” has already risen to €103,643 for 2020. However, this applies only to beneficiaries aged between 18 and 40.
For details of all gift tax exemptions, please see our factsheet Gift tax exemptions.