In addition to rules from the municipality, there are also rules from the tax authorities. If you want to live permanently in your vacation home, it becomes your main residence. From a tax point of view, this means that from now on you have to declare the home in box 1 of the income tax (instead of box 3). It can also have implications for financing. It largely depends on how you paid for the vacation home: with your own money or with a money loan.

Scenario 1: Living permanently in your vacation home

In this scenario, the vacation home you own is financed with a loan. If your vacation home becomes your primary residence, it is possible that the financing debt on it will also become part of Box 1. This is provided that there is an owner-occupied home debt in the new situation. This is the part of the mortgage or loan for which the interest may be deducted; this mortgage only relates to the owner-occupied home, i.e. to purchase, improve or maintain it. If you use part of the loan to furnish the house or buy a car, this is not part of the home equity debt.

In addition, the financing on your current primary residence and any excess value in that home play a role. These two aspects determine the amount of home equity debt and the form of borrowing money in your new situation.

• You have no financing on your current primary residence: in this case, financing in the new situation requires you to follow all the current tax rules for an owner-occupied home, including the additional tax rules on owner-occupied housing that have been in place since 2013. These stipulate that you must repay the new money loan in a maximum of 360 months. If you do not take out the loan with a Dutch bank but, for example, with a family member, the information obligation applies to yourself. This means that you must provide information about this loan to the Tax Office in the annual income tax return. If you do not do this or do it too late, you may miss out on (interest) deductions for this loan. If you take out the loan with a bank in the Netherlands, the bank will take care of this information obligation.
• You have financing on your current main residence: in the new situation, you may still be able to invoke the transitional right for the owner-occupied home scheme. You do not then have to comply with the aforementioned tax repayment and information obligation for the financing debt in the new situation, but you do have to comply with the other tax rules for an owner-occupied home.

Scenario 2: Living permanently in your vacation home.

If you have not taken out a loan for your second home, it becomes a home with no financing debt (Box 1) when it becomes your primary residence. If you have ongoing financing for your current primary residence that belongs to Box 1, it may remain there as long as the house is vacant and for sale after you leave. This is under certain conditions, usually for the remainder of the calendar year after you leave and possibly the following three calendar years. After that, this debt shifts to box 3 of the tax return.

Remodeling your new primary residence

Do you want to remodel your new primary residence and take out a loan to do so? Then you are entitled to deduct the (interest) costs if this loan falls under the owner-occupied home debt. If transitional law still applies to the financing of your current main residence (i.e. no tax repayment and information obligation), you can keep this provided the loan for the renovation is taken out before the end of the next calendar year and after the repayment of the financing debt on your former main residence. If you wish, you can take out a repayment-free money loan for this purpose. Furthermore, all current tax rules for the owner-occupied home are in effect, as described above.

Rules regarding the permanent occupancy of a vacation home may change and differ per municipality/location. So be sure to consult the central government website and contact your municipality.