If you want to buy a second home, be sure to look closely at the tax rules below. These are different than for a first home. Inform yourself well in advance!

Taxation of a second home comes in box 3

The income and expenses of your own, first home fall into box 1 of your tax return (income from work and home). The situation is different with a second home: the tax authorities see this as capital. As a result, this home falls into box 3. For the tax return, you need the WOZ (Valuation of Immovable Property) value of the second home. If you rent out the home for a longer period of time and the tenant enjoys rent protection, the WOZ value will decrease.

It is possible that there will be new rules for capital gains tax in Box 3 in the future. These may affect second home owners. For now, it is still a plan, and if it comes, it will not take effect until 2022. But it is good to take it into account already.

No right to mortgage interest deduction with vacation home

You are not entitled to mortgage interest deduction for a vacation home because it falls into Box 3. Other costs you incurred to finance the home are also not deductible. On the other hand, the debt does reduce your assets in box 3. Only the amount above the threshold of €3,100 (or €6,200 for tax partners) is deductible.

Rental income from second home

As long as you do not make a business out of renting out your second home, you do not have to declare the income from it to the tax authorities as income. However, for VAT purposes, you must pay attention to the number of days you rent out the home. If you rent out less than 140 days per year, you are not liable for VAT. If you rent out more than 140 days, the tax authorities consider you a VAT entrepreneur. You then pay 6% VAT and must charge VAT to tenants. The VAT you pay yourself for costs related to renting out the house (e.g. advertising costs, laundry) is then deductible.

Transfer tax

If you buy a second home, you have to pay 2% transfer tax. This does not apply if you buy a freehold home (usually this is a new home). Since the second home falls into Box 3, any selling profit when you sell the home is tax-free.

What about a second home abroad?

With a second home abroad, the Tax Office also considers the value of that home as capital for box 3. You must then enter the value you could get for the home if you sell it unoccupied. You can obtain this value from the local land registry. Any debt you have for this house also falls into box 3. You are entitled to an exemption in the Netherlands so you don’t pay double taxation.