Box 1: Income from Work and Home

Key Takeaways

Box 1 taxes your income from work (employment, self-employment, pensions) and your own home — it generates the bulk of Dutch tax revenue.
There are two tax brackets in 2026: 36.97% (up to €38,441) and 49.50% (above €38,441).
The first bracket includes both income tax and national insurance premiums (AOW, Anw, Wlz).
Tax credits (general tax credit and labour tax credit) significantly reduce your effective tax rate.
Mortgage interest on your primary home is deductible in Box 1, making home ownership tax-advantaged.

What Goes Into Box 1

Box 1 is the broadest box. It captures almost all income that results from personal effort or activity, plus the tax treatment of your own home.

Employment Income (Loon)

This is the most common Box 1 income. It includes:

Your gross salary
Holiday allowance (vakantiegeld, typically 8% of annual salary)
Bonuses and commissions
Benefits in kind (company car, phone, gym membership — to the extent they are taxable)
Severance payments
Employer pension contributions (the employer's contribution is not taxable, but your pension income later is)

Your employer withholds payroll tax (loonbelasting) each month as an advance on your annual income tax. The final amount is settled when you file your tax return.

Self-Employment Profits (Winst uit Onderneming)

If you are a sole trader (eenmanszaak) or partner in a VOF, your business profits are taxed in Box 1. Profit = revenue minus business costs.

Self-employed individuals have access to special deductions:

Deduction	Amount (2026)	Requirement
Self-employment deduction (zelfstandigenaftrek)	€1,200	Must work 1,225+ hours per year in the business
Starter deduction (startersaftrek)	€2,123	First 3 years of self-employment, on top of zelfstandigenaftrek
SME profit exemption (MKB-winstvrijstelling)	12.7% of qualifying profit	Applied after all other deductions

Tip

The self-employment deduction has been decreasing annually and is now €1,200 (down from €7,280 in 2019). Despite this reduction, the SME profit exemption of 12.7% remains a significant benefit. On a profit of €60,000, the MKB-winstvrijstelling alone saves approximately €3,000 in tax.

Other Work Income (Resultaat uit Overige Werkzaamheden)

Income from activities that do not qualify as a business but are more than passive wealth management. Examples:

Freelance assignments without a formal business registration
Income from providing services outside your regular employment
Managing property beyond normal asset management

This category does not qualify for the self-employment deductions.

Pension Income

All pension income is taxed in Box 1:

AOW (state pension) — received from age 67
Occupational pensions (pensioenuitkeringen) — from your employer's pension fund
Annuity payments (lijfrente-uitkeringen) — from private pension products

Pension income benefits from lower tax rates because retirees (over AOW age) no longer pay AOW premiums, reducing the first-bracket rate from 36.97% to approximately 19.07%.

Benefits such as WW (unemployment), WIA (disability), bijstand (social assistance), and Ziektewet (sickness) payments are all taxed in Box 1.

Your Own Home (Eigen Woning)

Your primary residence has a unique tax treatment in Box 1. Instead of being taxed as an asset in Box 3, your home is handled through two offsetting items:

The Eigenwoningforfait (Imputed Rental Value)

A percentage of your home's WOZ value (Waardering Onroerende Zaken, the municipal property valuation) is added to your Box 1 income:

WOZ Value	Rate (2026)
Up to €12,500	0%
€12,500 – €25,000	0.10%
€25,000 – €50,000	0.20%
€50,000 – €75,000	0.25%
€75,000 – €1,310,000	0.35%
Above €1,310,000	€4,585 + 2.35% of the excess

Mortgage Interest Deduction (Hypotheekrenteaftrek)

The interest you pay on your mortgage for your primary home is deducted from your Box 1 income. This is one of the most valuable deductions in the Dutch tax system.

Requirements:

The mortgage must be for your primary residence (not a second home or investment property)
Since 2013, new mortgages must be annuity or linear (interest-only mortgages no longer qualify for new loans)
The deduction period is limited to 30 years per home

Example: Home with WOZ €400,000 and €12,000 annual mortgage interest

Gross income€ 400.000

Income tax-€ 193.183

Tax credits+€ 0

Net income€ 206.817

Effective tax rate48.3%

Calculation:

Eigenwoningforfait: €400,000 × 0.35% = €1,400 (added to income)
Mortgage interest: €12,000 (deducted from income)
Net deduction: €10,600
Tax savings at 49.50% marginal rate: €10,600 × 49.50% = €5,247 per year

Warning

If you have paid off your mortgage completely, you still owe the eigenwoningforfait. However, if you have no or very low mortgage debt, the special rule "aftrek geen of geringe eigenwoningschuld" may reduce or eliminate this addition. This means mortgage-free homeowners often pay zero net Box 1 tax on their home.

Box 1 Tax Rates (2026)

The Netherlands has two income tax brackets in 2026:

Taxable Income	Rate	Composition
Up to €38,441	36.97%	Income tax: 9.32% + AOW: 17.90% + Anw: 0.10% + Wlz: 9.65%
Above €38,441	49.50%	Income tax only — national insurance premiums are capped

The 36.97% first-bracket rate is not purely income tax. It includes national insurance premiums (volksverzekeringen) that fund:

AOW (state pension): 17.90%
Anw (surviving dependents' insurance): 0.10%
Wlz (long-term care insurance): 9.65%

Above €38,441, you no longer pay these premiums. That is why the second bracket (49.50%) is pure income tax — and why the jump from first to second bracket is so significant.

Good to know

If you are over AOW retirement age (67 in 2026), you no longer pay AOW premiums. Your first-bracket rate drops to approximately 19.07%. This is why pension income is taxed so much more lightly than employment income, even when the gross amounts are similar.

Tax Credits (Heffingskortingen)

Tax credits are subtracted directly from your calculated tax — not from your income. One euro of tax credit saves you exactly one euro of tax.

General Tax Credit (Algemene Heffingskorting)

Everyone with income receives this credit. It starts at a maximum and phases out as income rises:

Maximum: €3,362 (at income up to €24,813)
Phase-out: 6.51% of income above €24,813
Reaches zero: at approximately €76,459

Labour Tax Credit (Arbeidskorting)

Available to anyone who earns employment or self-employment income (not pensions or benefits). It builds up and then phases out:

Income Range	Build-up/Phase-out Rate	Cumulative Credit
€0 – €11,491	+8.231%	Up to €946
€11,491 – €24,821	+29.861%	Up to €4,926
€24,821 – €39,958	+3.085%	Up to €5,532 (maximum)
Above €39,958	−6.51%	Decreasing

Combined Effect of Credits

The tax credits are why the effective tax rate is much lower than the headline bracket rates:

Gross Salary	Gross Tax	Total Credits	Net Tax	Effective Rate
€25,000	€9,244	€6,905	€2,339	9.4%
€35,000	€12,942	€7,702	€5,240	15.0%
€45,000	€17,889	€6,798	€11,091	24.6%
€55,000	€22,836	€5,950	€16,886	30.7%
€75,000	€32,733	€3,549	€29,184	38.9%
€100,000	€45,108	€1,921	€43,187	43.2%

Tip

At a salary of €35,000, the effective rate is only 15.0% — despite the headline bracket of 36.97%. Tax credits are the most underappreciated feature of the Dutch tax system. If someone tells you "Dutch taxes are almost 50%," they are citing the marginal rate, not the effective rate.

Common Deductions

Beyond the mortgage interest deduction, Box 1 offers several other deductions:

Charitable Donations (Giftenaftrek)

Periodic gifts: Fully deductible if committed for at least 5 years via a notarial deed or written agreement
One-time gifts: Deductible above 1% of your aggregate income, up to 10% of aggregate income

Specific Healthcare Costs (Specifieke Zorgkosten)

Unreimbursed medical expenses above a threshold may be deductible. This includes costs for illness, disability, or diet prescribed by a doctor.

Alimony (Alimentatie)

Periodic maintenance payments to a former spouse are deductible from your Box 1 income. The recipient must report the payments as Box 1 income.

Study Costs (Scholingsuitgaven)

Costs for education and training to maintain or improve your professional skills may be deductible, above a threshold of €250. This does not include costs reimbursed by your employer.

Common Mistakes

Not filing a return when you are owed a refund — If you arrived mid-year, changed jobs, or had periods without income, your employer may have over-withheld tax. File your return to claim the excess back.
Forgetting the mortgage interest deduction — If you bought a home and have a mortgage, the interest is deductible. Not claiming this is leaving significant money on the table.
Missing self-employment deductions — ZZP'ers must actively claim the zelfstandigenaftrek and startersaftrek. They are not applied automatically.
Not understanding the hour requirement — The 1,225-hour requirement for the zelfstandigenaftrek is strict. Administration, acquisition, and travel time count, but you must be able to demonstrate the hours if audited.
Confusing gross and effective tax rates — The 36.97%/49.50% rates are marginal rates before credits. Your effective rate is almost always significantly lower.
Ignoring the eigenwoningforfait when mortgage-free — If you own your home outright, you may still owe the eigenwoningforfait unless the "no or low mortgage debt" exception applies.