Mortgage Interest Deduction

Key Takeaways

Mortgage interest on your primary residence (eigen woning) is deductible from your Box 1 income.
The deduction is limited to 37.56% in 2026, regardless of your actual tax bracket.
You must add the eigenwoningforfait (imputed rental value) to your income, which partially offsets the interest deduction.
Only annuity or linear mortgages taken out after January 1, 2013 qualify. Interest-only mortgages taken out after this date do not qualify.
The maximum deduction period is 30 years per property.

How the Mortgage Interest Deduction Works

The Netherlands has one of the most generous mortgage interest deduction schemes in Europe. When you buy a home to live in (your primary residence), the interest you pay on the mortgage is deductible from your taxable income in Box 1.

However, there is a catch: you must also add the eigenwoningforfait (imputed rental value) to your income. The net effect is:

Net deduction = Mortgage interest paid − Eigenwoningforfait

This net amount reduces your taxable income in Box 1, which means you pay less income tax.

eigenwoningforfait

Eligibility Requirements

To claim the mortgage interest deduction, all of the following must be true:

The property is your primary residence — You actually live there. Holiday homes, rental properties, and second homes do not qualify (they fall under Box 3).
The mortgage is used to purchase, improve, or maintain the home — Remortgaging to fund a vacation or car does not qualify.
The mortgage meets repayment requirements (for mortgages taken out after January 1, 2013) — It must be an annuity or linear mortgage that is fully repaid within 30 years.
You are the owner or co-owner — The property must be (partially) in your name.

Good to know

If you took out your mortgage before January 1, 2013, the old rules apply. Interest-only (aflossingsvrij) mortgages from before this date are still deductible under transitional rules. You have until 2044 to benefit from these grandfathered terms.

The Eigenwoningforfait

The eigenwoningforfait is calculated as a percentage of the WOZ value (Waardering Onroerende Zaken) — the government-assessed value of your property:

WOZ Value	Eigenwoningforfait Rate (2026)
Up to €12,500	0.00%
€12,500 – €25,000	0.15%
€25,000 – €50,000	0.25%
€50,000 – €75,000	0.30%
€75,000 – €1,350,000	0.35%
Above €1,350,000	€4,725 + 2.35% of value above €1,350,000

Example

For a home with a WOZ value of €400,000:

Eigenwoningforfait = €400,000 × 0.35% = €1,400 per year

This €1,400 is added to your taxable income. If your mortgage interest is €8,000 per year, your net deduction is €8,000 − €1,400 = €6,600.

The "Villatax" (Eigenwoningforfait for Expensive Homes)

For homes with a WOZ value above €1,350,000, the eigenwoningforfait increases sharply. The surcharge of 2.35% on the value above €1,350,000 is colloquially called the "villatax." For a home worth €2,000,000:

Base: €4,725
Surcharge: (€2,000,000 − €1,350,000) × 2.35% = €15,275
Total eigenwoningforfait: €20,000

This can significantly offset (or even exceed) the mortgage interest deduction for owners of expensive properties with low remaining mortgage debt.

How the Deduction Reduces Your Tax

The mortgage interest deduction reduces your taxable income in Box 1. The tax saving depends on the deduction rate, which has been capped:

Deduction Rate Cap

Since 2020, the maximum rate at which you can deduct mortgage interest has been gradually reduced. In 2026, the cap is at the second bracket rate of 37.56%.

This means even if you earn above €78,426 and pay 49.50% tax on your highest income, your mortgage interest deduction only saves you 37.56% at most.

Worked Example

Situation: You earn €90,000 per year. Your mortgage interest is €12,000 per year. Your eigenwoningforfait is €1,750.

Step	Amount
Mortgage interest paid	€12,000
Eigenwoningforfait (added to income)	−€1,750
Net deduction	€10,250
Tax saving (€10,250 × 37.56%)	€3,850

Without the deduction, you would pay €3,850 more in tax per year — that is roughly €321 per month.

The Hillen Arrangement (Wet Hillen)

If your mortgage interest is lower than your eigenwoningforfait (common for people who have paid off their mortgage or have very low remaining debt), the difference would normally be added to your taxable income.

The "Wet Hillen" arrangement (eigenwoningforfait aftrek) historically prevented this by allowing you to deduct the difference. However, this arrangement is being phased out from 2019 to 2048. Each year, the Hillen deduction decreases by 3.33%.

In 2026, the Hillen deduction covers approximately 71.82% of the excess eigenwoningforfait. By 2048, it will be completely eliminated, meaning mortgage-free homeowners will pay the full eigenwoningforfait as additional income.

Warning

If you are planning to pay off your mortgage entirely, be aware that in the future you will owe tax on the eigenwoningforfait without the mortgage interest to offset it. This does not mean paying off your mortgage is a bad idea — but factor the eigenwoningforfait into your calculations.

Mortgage Types and Deductibility

Mortgages Taken Out After January 1, 2013

The interest is only deductible if the mortgage is:

Annuity mortgage (annuïteitenhypotheek) — Equal monthly payments with a shifting ratio of interest and repayment
Linear mortgage (lineaire hypotheek) — Equal monthly repayments plus decreasing interest

The mortgage must be fully repaid within 30 years. If you stop making repayments, you lose the deduction for the remaining portion.

Mortgages Taken Out Before January 1, 2013

These follow the old rules. Interest-only, savings, investment, and life insurance mortgages are all still deductible, provided the total deduction period does not exceed 30 years from the date the mortgage was taken out.

	Before 2013	After 2013
Interest-only (aflossingsvrij)	—	—
Annuity mortgage	—	—
Linear mortgage	—	—
Savings mortgage (spaarhypotheek)	—	—
Repayment required	—	—

Tax Partners and the Mortgage Deduction

The mortgage interest deduction is a joint income component (gezamenlijk inkomensbestanddeel) for tax partners. This means:

You can allocate the net deduction (interest minus eigenwoningforfait) in any ratio between partners
It does not matter whose name is on the mortgage or who actually makes the payments
You should allocate it to the partner who benefits most (considering credit phase-outs)

In practice, allocating the deduction to the higher-earning partner often makes sense, but check both options.

Moving and the Mortgage Deduction

Buying a New Home Before Selling the Old One

If you temporarily own two homes, you can deduct the mortgage interest on both properties for up to three years (the old home is treated as still being your primary residence for this period). After three years, the old home moves to Box 3.

Moving Abroad

If you leave the Netherlands, your Dutch home is no longer your primary residence. The mortgage deduction generally ends. However, if you rent it out, it moves to Box 3. If you sell it, the usual capital gains exemption for your primary residence applies.

Renting Out Your Home

If you temporarily rent out your primary residence (e.g., while on a work assignment abroad for a limited period), you may be able to keep the mortgage deduction under certain conditions. Check with the Belastingdienst or a tax advisor.

The 30-Year Time Limit

The mortgage interest deduction is available for a maximum of 30 years per property. The clock starts when you first take out a mortgage on the property. If you refinance, the clock does not restart.

If you sell and buy a new property, you carry over any unused years. For example, if you deducted interest for 10 years on your first home, you have 20 years of deductibility remaining for your next home's mortgage.

Tip

The 30-year limit rarely affects people with annuity or linear mortgages (taken out after 2013), because these are fully repaid within 30 years anyway. It is more relevant for people with pre-2013 interest-only mortgages who may still have outstanding debt after 30 years.

Common Mistakes

Claiming deduction for a non-primary residence — Only your primary residence qualifies. Rental properties and second homes fall under Box 3.
Deducting interest on a top-up mortgage used for non-housing purposes — If you remortgage to fund a car or holiday, that portion of the interest is not deductible.
Forgetting the eigenwoningforfait — The imputed rental value must be added to your income. It partially offsets the interest deduction.
Not claiming the deduction during temporary double home ownership — If you own two homes briefly during a move, you may be able to deduct interest on both.
Assuming mortgage-free homeowners pay no housing tax — With the Hillen arrangement phasing out, mortgage-free homeowners will increasingly owe tax on the eigenwoningforfait.