How does the Dutch mortgage interest deduction (hypotheekrenteaftrek) work?

Dutch homeowners can deduct mortgage interest payments from Box 1 income, reducing their income tax bill. This deduction, called hypotheekrenteaftrek, applies to the interest on a mortgage used to buy, improve, or maintain a primary residence (eigen woning).

The deduction is only available for annuity or linear (straight-line) mortgages taken out after 1 January 2013. Older interest-only mortgages taken before that date may still qualify under transitional rules. The deduction is limited to the maximum Box 1 rate, which has been gradually reduced and is currently capped at 36.97% (2024), regardless of the taxpayer's actual marginal rate.

In exchange for the deduction, homeowners must add back a notional rental value (eigenwoningforfait) of 0.35% of the property's WOZ value (for values between €75,000 and €1.2 million in 2024) to their Box 1 income. This partially offsets the value of the deduction.

For high-value homes (WOZ over €1.2 million), the eigenwoningforfait is 2.35% on the excess above €1.2 million. As mortgage balances fall over time and property values rise, many homeowners find the net tax benefit from the deduction decreases.