You’ve bought a home to live in, circumstances change and you decide to rent it out. But what do you need to think about in terms of tax?
You might have bought a building that comes with a sitting tenant in one apartment. Perhaps you’re going on holiday and want to take advantage of the possibility for a holiday let. You might have a period abroad as part of your job. Maybe you’re moving house and thinking about keeping your old home to rent out.
There are tax implications to becoming an accidental landlord, however, and it’s important that you factor them into your decision making.
The use case that probably affects the most people is deciding to rent out a home that they own for a few days a year, through a holiday letting service such as Airbnb or Booking.com. But beware! This has financial implications for a tax perk on your mortgage interest.
‘Let’s start with Airbnb, and say you rent out for the maximum number of days you are allowed to rent it out,’ says an expert from Blue Umbrella. ‘Then, you have to declare that to the tax office as income, in the sense of box 1 income. A total of 70% of the revenue, minus some costs, will be taxed.
‘This can be really disappointing. If you ask €1,000 a week, receive €4,000 for the year and think it’s big money, it might not be. The taxable income will be deducted from your hypotheekrenteaftrek offset and you might effectively receive nothing at all! The income lowers the deductible interest from your mortgage.’
You may even have to pay out extra tax on the holiday rental income if your mortgage is low or you have no mortgage.
Meanwhile, from January 2024, holiday housing brokers such as Airbnb will be required to report landlord registrations directly to the Belastingdienst tax office, so you need to declare your income correctly.
If you don’t live in a property, it comes under what is known as Box 3, the wealth and small investment tax. ‘Then it is a different ball game,’ says the Blue Umbrella expert. ‘If it’s your second home, when you rent it out, it moves from Box 1 as a residential home, to be seen as an investment. Then you will be taxed based on the total value of the asset, minus any mortgage still on that property.’
Rental revenue is not directly taxed, and it can be to your advantage if you have a high mortgage. If the official estimated value of the house – the WOZ waarde – is low and the mortgage is high, there could be no taxable gain. ‘The actual capital gain, the real revenue doesn’t matter,’ he said. ‘The bottom line is, we have to look at the total value of your assets and do a calculation, but we do not look at the real revenue. It can be beneficial to rent out.’
Currently, a 31% tax is levied on the assumed gain of assets in box 3, which ranges from 1.82% to 5.53% but is not related to the reality. Debts are also assumed to be repaid at a fictional interest level of 2.28%.
If you go abroad and rent out your property, it will remain taxed in the Netherlands, whether or not you are resident somewhere else for income tax purposes.
‘For property, we always look in which country the property is located, and most taxation treaties say this is where it will be taxed,’ said the Blue Umbrella expert. ‘It’s different from other assets. It’s all about location, location, location.’
If you rent out your house, you should inform your mortgage lender. If you have a residential mortgage, you might have to switch to a buy-to-let construction or pay for permission to rent. It’s also important to make sure that your building and contents insurance reflects the rental situation.
Another set of sums to do is the number of ‘points’ your property has. The size of the property, and its facilities (including the length of the kitchen counter) are all added up, and the amount of rent that you can charge can depend on its points. A tenant can sometimes challenge the rent if you are charging too much.
If your property has up to 144 points, the maximum rent you can charge for the totally unfurnished property is €763 a month – but government proposals may extend this to cover homes of up to 187 points, with a maximum rent of €1,000. ‘There might be a maximum rent you can calculate,’ said the expert. ‘And make sure that your mortgage provider agrees that you can rent it out, because if it doesn’t, you might have to pay back the mortgage!’
For cost-efficient advice on your situation, contact Blue Umbrella
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