Taxes when buying a second home
I am buying a second home: how do the tax technicalities work?
Owning your own home goes in Box 1 'Income from employment and home.’ When you have bought a
second home (holiday home, investment property, or accommodation building), then this falls into Box 3 'Income from savings and investments.’
What goes in BOX 3?
In Box 3 you put all the income that comes from savings and investments. All the incomes from this box are added together, the deductions come from this number, and then you pay a tax for this amount.
How does it work?
What falls into the category of possessions:
• Mutual funds, bonds, equity investments and other investment titles
• Any other property, excluding your primary residence
• Rights to real estate property (eg. usufruct)
• Values of investment / savings insurance that are not in Box 1
What falls under debts:
• Debt (everything except debts from your first home or substantial interest).
The first 2,900 euros per person of debts are not deductible. In addition, tax assets and claims are not included in Box 3. Exceptions to this rule are inheritance debts and assets.
1.2% income tax
On the remaining amount you then need to pay a 1.2% income tax. This amount does not come out of the blue. The tax office will remember that you make a 4% return. This is an assumption that always gets accounted for. The tax authorities will place a 30% income tax on your returnThe tax authorities will require a 30% income tax on your return. 30% of the 4% = 1.2%.
Free of charge
Anyone who pays taxes has the right to have free of charge equity in Box 3. In 2012 and 2013 this amount was 21,139 euros. Therefore, you will have to pay taxes when your taxable income is above this number.