The Dutch owner-occupied home scheme
Accountant-authored. Written and published by Vincent hanegraaf, an accountant approved on OpenAccountants. They have not provided a licence number, so their credentials are self-declared and we have not checked them against a register. No second accountant has attested to this version yet. General reference material, not advice on your specific facts; don't file, pay, or take a position on it without a professional reviewing your situation.
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Relocation scheme 1
A former main residence that is vacant and intended for sale continues to qualify. This exception applies during the calendar year in which the property is vacated and the following three calendar years (relocation scheme 1).The Dutch Income Tax Act 2001 provides the following exceptions
Relocation scheme 2
A vacant property or a property under construction qualifies if it is intended to become the taxpayer’s main residence during the current calendar year or one of the following three calendar years (relocation scheme 2).The Dutch Income Tax Act 2001 provides the following exceptions
Divorce scheme
If the taxpayer leaves the property but it remains available to a former partner as that person’s main residence, it continues to qualify for no more than 24 months. This is commonly known as the divorce scheme.The Dutch Income Tax Act 2001 provides the following exceptions
Nursing or residential care home
When a person moves into a nursing or residential care home for medical reasons or because of old age, the former home may continue to qualify for up to two years.The Dutch Income Tax Act 2001 provides the following exceptions
Expatriate assignment scheme
A home that has served as the taxpayer’s main residence for at least one year may continue to qualify if it is subsequently available only temporarily as a main residence. It may not be made available to other people, subject to a few family-related exceptions, and the taxpayer may not have another qualifying owner-occupied home. This is known as the expatriate assignment scheme because it is especially relevant to employees who are posted elsewhere by their employer for a fixed period. Unlike the other schemes described above, this scheme applies only if the taxpayer claims it in the income tax return. Without such a claim, the property falls within box 3.
The Dutch owner-occupied home scheme
This article explains the legal requirements that a property must meet to qualify as an owner-occupied home for Dutch income tax purposes. It also discusses qualifying home acquisition debt and explains how the owner-occupied home scheme operates.
An owner-occupied home forms part of taxable income from work and home in box 1. For most taxpayers, taxable income from the home consists only of the deemed owner-occupied home benefit. Taxable income may also include a taxable payment from a qualifying endowment insurance policy linked to the home (KEW), a qualifying home savings account (SEW), or a qualifying home investment account (BEW), as well as 70% of the net rental income received when the home is let temporarily.
Deductible expenses are set off against this taxable income. These include interest and costs relating to qualifying home acquisition debt, ground rent payments, and interest and costs relating to certain residual debts.
A property falls within box 1 if it is available, other than temporarily, as the main residence of the taxpayer or a member of the taxpayer’s household. The taxpayer must also be the legal or economic owner. A property may also qualify when the taxpayer has acquired a right of usufruct, residence, or use under the law of succession.
The general rule is that a property qualifies only if it serves as the taxpayer’s main residence. The Dutch Income Tax Act 2001 provides the following exceptions:
The benefit derived from an owner-occupied home is determined on a deemed basis. It is calculated as a fixed percentage of the property’s value for purposes of the Valuation of Immovable Property Act (the WOZ value).
For 2026, the annual benefit is calculated as follows:
2026 annual deemed benefit by owner-occupied home value
| Owner-occupied home value | Annual deemed benefit |
|---|---|
| Up to and including €12,500 | Nil |
| More than €12,500, up to and including €25,000 | 0.10% of the value |
| More than €25,000, up to and including €50,000 | 0.20% of the value |
| More than €50,000, up to and including €75,000 | 0.25% of the value |
| More than €75,000, up to and including €1,350,000 | 0.35% of the value |
| More than €1,350,000 | €4,725 plus 2.35% of the part of the value exceeding €1,350,000 |
Interest and costs relating to qualifying home acquisition debt are deductible from the benefits derived from the owner-occupied home. A debt can qualify only if it was incurred in connection with such a home. It must have been taken out to acquire, improve, or renovate the home, or to pay the costs of obtaining that debt.
Debts arising from 2013 onwards must meet additional conditions:
When a taxpayer disposes of an owner-occupied home, the disposal balance is added to the owner-occupied home reserve. This balance equals the sale proceeds less the qualifying home acquisition debt and the costs of sale.
When the taxpayer acquires a new home, qualifying home acquisition debt cannot be obtained for the amount held in the reserve. The taxpayer is treated as investing that amount in the new property. If the taxpayer nevertheless borrows more than the permitted qualifying amount, the excess is a box 3 debt. The owner-occupied home reserve expires no later than three years after it arises.
A residual debt arises if a taxpayer sells a home at a loss, meaning that the sale proceeds are lower than the qualifying home acquisition debt. If that residual debt arose between 29 October 2012 and 31 December 2017, it is treated as a box 1 debt. Its interest and costs are deductible in box 1 for no more than 15 years, and the tax repayment requirement does not apply.
Residual debts arising before 29 October 2012 or after 31 December 2017 fall within box 3.
A taxpayer may claim the deduction for having no or only a small qualifying home acquisition debt, commonly known as the Hillen deduction, when the deemed owner-occupied home benefit exceeds the related deductible interest and costs. In principle, the deduction is based on the positive difference.
The Hillen deduction has been gradually reduced since 2019 and will eventually be abolished. In 2026, it amounts to 71.867% of the positive difference.
If deductible owner-occupied home expenses are taken into account in the highest income tax bracket, which is 49.50% in 2026, a rate adjustment applies. This limits the tax benefit of the deduction to the basic rate of 37.56%.
The introduction of the Income Tax Act 2001 also introduced the tax-favoured qualifying endowment insurance policy linked to the home (KEW). The qualifying home savings account (SEW) and qualifying home investment account (BEW) followed in 2008.
These products allowed taxpayers to save towards repayment of qualifying home acquisition debt without being taxed on the interest component reflected in the eventual payment. The exemption is capped. Over a lifetime, a taxpayer may receive no more than €207,500 tax-free from KEW, SEW, and BEW products combined, based on the 2026 amount.
The tax-favoured treatment for new KEW, SEW, and BEW products was abolished from 2013. Transitional rules apply to existing products. A payment is tax-free only if the following conditions are met:
The owner-occupied home scheme was most recently evaluated in 2019. The evaluation concluded that the scheme had become excessively complex and difficult to enforce. At the time, reform was left to a future government. No reform has yet taken place, and the current Jetten government will also leave the scheme unchanged.
A taxpayer who takes out a loan to improve or maintain the home may deduct the related interest and costs. This is possible only to the extent that the improvement or maintenance expenditure can be supported by written evidence. Receipts should therefore be retained carefully.
The tax repayment requirement does not apply to qualifying home acquisition debt from before 2013, which is referred to as existing qualifying home acquisition debt. If such debt is refinanced, the transitional rules continue to apply and no tax repayment requirement is imposed. The same applies when the taxpayer moves to a new home.
Refinancing qualifying home acquisition debt is governed by non-tax rules as well. Under the Code of Conduct for Mortgage Financing, a bank may provide no more than 50% of the property’s value on an interest-only basis. A bank may also never provide mortgage credit exceeding 100% of the property’s value.
Qualifying home acquisition debts arising from 2013 onwards are generally subject to the tax repayment requirement. If the box 3 advantage exceeds the benefit of interest relief in box 1, the taxpayer can place the loan in box 3 by ensuring that it no longer meets the tax repayment requirement. A qualifying home acquisition debt dating from before 2013 cannot be moved to box 3 in this way.
To qualify for the exemption on a KEW, SEW, or BEW payment, the taxpayer must use the payment to repay qualifying home acquisition debt. Using it to renovate the property does not meet this condition.
If the provider of a KEW, SEW, or BEW pays the amount to the taxpayer, the taxpayer must use the funds to repay qualifying home acquisition debt in order to obtain the exemption. The provider does not have to transfer the money directly to the lender.
Supreme Court of the Netherlands, 13 March 2015, no. 14/02588, ECLI:NL:HR:2015:561, V-N 2015/19.1.8
Contributed by Vincent hanegraaf, nvt.
Contributed by Vincent hanegraaf, nvt.
Other Netherlands computations in the OpenAccountants Tax Library.
2026 annual deemed benefit by owner-occupied home value
| Owner-occupied home value | Annual deemed benefit | | --- | --- | | Up to and including €12,500 | Nil | | More than €12,500, up to and including €25,000 | 0.10% of the value | | More than €25,000, up to and including €50,000 | 0.20% of the value | | More than €50,000, up to and including €75,000 | 0.25% of the value | | More than €75,000, up to and including €1,350,000 | 0.35% of the value | | More than €1,350,000 | €4,725 plus 2.35% of the part of the value exceeding €1,350,000 |
Relocation scheme and expatriate assignment scheme benefit
No deemed benefit is calculated for a property covered by either relocation scheme. If the expatriate assignment scheme applies, the deemed benefit is 0.55% on a value of up to €1,350,000. The rate on the value above that amount is 2.35%.
Temporary availability to third parties
If the home is made temporarily available to third parties, the deemed benefit is increased by 70% of the benefit obtained from doing so.
Room-rental exemption (2026)
A separate exemption applies to the letting of a room. If annual room-rental receipts do not exceed €6,633 in 2026, the rented space remains part of the owner-occupied home and the rental benefit is disregarded. The space must not constitute an independent dwelling. Whether it is furnished is irrelevant. Both the tenant and the landlord must be registered at the property’s address in the Personal Records Database.
Tax repayment requirement
The tax repayment requirement applies to these debts under the current rules. The full debt must be repaid at least on an annuity basis within no more than 30 years.
Repayment obligation in agreement
The repayment obligation must be included in the agreement with the lender.
Information obligation for non-administrative lenders
If the loan was agreed with a person or entity that has no statutory administrative obligation, the taxpayer must provide information about it to the Dutch Tax and Customs Administration. This may concern an individual, such as a parent, but also the taxpayer’s own private limited company or a foreign bank that has no administrative obligation in the Netherlands. The information is supplied in the income tax return.
Consequence of not meeting conditions
If the conditions are not met, the loan falls within box 3. If they are met, or if the loan is qualifying home acquisition debt dating from before 2013, the loan falls within box 1. The taxpayer cannot elect to allocate a box 1 debt to box 3.
Temporary repayment shortfall
The Income Tax Act 2001 contains arrangements for a temporary repayment shortfall relating to debt governed by the current rules. The shortfall may be made up or, subject to conditions, spread over the remaining period of entitlement to interest relief. In that case, the loan remains in box 1.The Income Tax Act 2001
Bridging loans
The tax repayment requirement does not apply to bridging loans. Section 3.119f of the Income Tax Act 2001 defines what is treated as a bridging loan.Section 3.119f of the Income Tax Act 2001
Hillen deduction rate (2026)
71.867% of the positive difference
Highest income tax bracket (2026)
49.50%
Basic rate for deduction (2026)
37.56%
Lifetime tax-free exemption cap (2026)
Over a lifetime, a taxpayer may receive no more than €207,500 tax-free from KEW, SEW, and BEW products combined, based on the 2026 amount.
Annual contribution condition
Contributions must have been made to the product annually. The former minimum contribution period, known as the time lock, no longer applies.
Contribution ratio condition
The highest annual contribution may not exceed ten times the lowest annual contribution.
Use of payment condition
The entire payment must be used to repay qualifying home acquisition debt.
Consequence of not meeting conditions
If one or more of these conditions are not met, the interest component of the payment is taxable in box 1.
Section 3.111 of the Income Tax Act 2001
This section defines the term “owner-occupied home”.Section 3.111 of the Income Tax Act 2001
Section 3.112 of the Income Tax Act 2001
This section sets out the deemed benefit derived from an owner-occupied home.Section 3.112 of the Income Tax Act 2001
Section 3.119a of the Income Tax Act 2001
This section contains the definition of qualifying home acquisition debt that has applied since 2013.Section 3.119a of the Income Tax Act 2001
Section 3.119aa of the Income Tax Act 2001
This section sets out the additional borrowing restriction.Section 3.119aa of the Income Tax Act 2001
Section 10bis.1 of the Income Tax Act 2001
This section defines existing qualifying home acquisition debt for purposes of the transitional rules.Section 10bis.1 of the Income Tax Act 2001
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