If you've ever stared at your payslip wondering why your "tax rate" doesn't match the bracket percentages you read about online, these two credits are the reason. The algemene heffingskorting (general tax credit) and the arbeidskorting (labour tax credit) quietly do most of the heavy lifting in bringing your actual tax bill down. Both get applied automatically through payroll, so you've never had to ask for them, but understanding how they phase in and out explains why net pay doesn't scale in a neat straight line with gross pay, no matter how many spreadsheets you build.
Think of it like a loyalty discount, but for working
The government effectively gives everyone a base discount just for having income (algemene heffingskorting), then a bigger discount specifically for earning that income through work (arbeidskorting). Both shrink again once you earn enough that the government decides you don't need the discount anymore. It's less generous than your coffee shop's loyalty card, but it's the one that actually shows up on your payslip.
For 2026, the general tax credit is worth up to €3,115 a year for incomes up to €29,736. Above that, it phases out at a rate of about 6.4 cents per extra euro earned, reaching zero at €78,426. It exists for everyone with taxable income, regardless of employment status. See the official algemene heffingskorting page for the exact phase-out table. If you have a fiscal partner who earns little or nothing, part of this credit can sometimes transfer between you, and the partner rules spell out exactly when.
The labour tax credit is specifically for people earning income from work (employment or self-employment), and it's structured in four bands for 2026. Full details on arbeidskorting are on the Belastingdienst site, but here's the table that actually matters when you're trying to guess your own number:
| Income band | What happens |
|---|---|
| Up to €11,965 | 8.324% of income |
| €11,965–€25,845 | Builds up at 31.0% of income above the first band |
| €25,845–€45,592 | Builds up more slowly, at 1.95%. Maximum credit of €5,685 reached here |
| Above €45,592 | Phases back out at 6.51%, reaching zero around €132,920 |
Because the labour tax credit builds up fastest in the second band and then phases out in the highest, your effective marginal tax rate isn't a clean staircase that matches the official Box 1 brackets. It wobbles as credits build and unwind on top of the brackets. This is exactly why two people with similar gross salaries can see different effective tax rates, and why it's nearly impossible to estimate net pay by hand without quietly giving up halfway through and opening a spreadsheet. The calculator applies both credits automatically based on your taxable income for the year, so the net figure already reflects this interaction, no wobbling required on your end.
This article reflects Dutch tax rules as of 2026. It is not tax advice, consult a qualified belastingadviseur for your specific situation.