Renting out a property is the ideal way to earn extra money. But if you have extra income, of course you have to take into account extra taxes. In this article, we explain the tax consequences of renting out a property per situation.
The tax authorities divide income tax into 3 groups, also known as boxes. The percentage of income tax to be paid differs for each box. If you rent out a house, you pay income tax in box 1 or box 3, depending on the situation.
- Box 1: income from work and home
- Box 2: income from substantial interest
- Box 3: income from savings and investments
Letting your own home (temporarily)
Your own home is the home you own and where you have your main residence. If you (temporarily) let your own home, for example, because you are going abroad for a while, you have to report 70 percent of the rental income as ‘income from temporary letting’ in box 1. You retain your right to mortgage interest relief during the rental period. If during the rental period you have incurred costs related to the rental, such as cleaning costs and extra costs for gas, water and electricity, you may also report these as deductions.
Letting a second home
Do you rent out a second home that you own but do not live in, such as a holiday home? Then you have to report the WOZ value of this home in box 3 as ‘other real estate’. The second home is seen as capital and also taxed as such. You do not have to declare the rental income.
Letting a house for sale
If you let a property that is up for sale under the Leegstandwet, you never pay tax on the rental income. During the rental period, the property will be taxed as capital in Box 3 and you will lose your right to mortgage interest relief. When the rental period ends, the property will again be taxed in box 1 and the mortgage interest may be deducted again. This applies up to a maximum of 3 years after the calendar year in which you left the property. After this, even after the rental period ends, the home is still taxed as capital in box 3 and you lose your right to mortgage interest deduction. This is also known as the three-year period.
We intend to be as helpful as possible on this subject but different variables can affect your situation. Therefore, please verify the consequences of renting out your property with your tax advisor. More information can also be found on the website of the tax authorities: www.belastingdienst.nl
