Buy a home in the Netherlands and at some point a Dutch colleague will mention "je krijgt toch hypotheekrenteaftrek" as if that fully explains your mortgage, your taxes, and possibly your life choices. It's real, it's valuable, and it's also more nuanced than "you get some money back." Here's what the mortgage interest deduction actually does to your annual tax bill, and why the benefit isn't the same for everyone or forever.
The one-sentence version
You can deduct the interest on your mortgage from your taxable income, but the government also adds back a notional amount for the benefit of living in your own home (the eigenwoningforfait), so the real tax break is the net effect of those two numbers, not the interest amount by itself.
Interest paid on a mortgage used to buy, build, or renovate your main residence is deductible in Box 1, provided the loan is being repaid on at least a 30-year annuity or linear schedule (mortgages taken out before 2013 have different, often better, transitional rules). That deductible interest reduces your taxable Box 1 income, which lowers the tax you owe at your marginal rate, up to a capped percentage rather than your full marginal rate at the top of the scale.
For 2026, the deduction is capped at 37.56%, even if your actual marginal rate is the top 49.5% band. That cap has been phased in gradually over several years specifically to reduce the relative advantage the deduction gives to higher earners, so if you're in the top bracket, don't expect to get back 49.5 cents on every euro of interest, you'll get back 37.56 cents, with a further small correction applied above the top bracket threshold.
The deduction isn't automatic for every euro you pay your lender. It generally covers:
It does not cover interest on a mortgage for a second home, a buy-to-let property (that falls under Box 3 instead), or general consumer borrowing that happens to be secured against your house. See the official aftrekbare kosten eigen woning page for the full list of what counts.
Here's the part that catches people off guard: the Belastingdienst doesn't just let you deduct interest and call it done. It also adds a notional income amount to your taxable income for the benefit of owning and living in your home, called the eigenwoningforfait. It's calculated as a percentage of your home's official WOZ value, and for most homes in 2026 that percentage is 0.35% of the WOZ value (the rate is lower for cheaper homes and rises sharply above €1.35 million).
| WOZ value | Eigenwoningforfait rate |
|---|---|
| Up to €12,500 | 0% |
| €12,500 – €75,000 | 0.10% – 0.25%, stepped |
| €75,000 – €1,350,000 | 0.35% (most homes) |
| Above €1,350,000 | €4,725 plus 2.35% of the excess |
Your actual tax benefit comes from the interest you pay minus the eigenwoningforfait added back. If your interest is €9,000 a year and your eigenwoningforfait is €1,400, only the €7,600 difference is what actually gets deducted at your rate, not the full €9,000.
Worked example
A home with a WOZ value of €400,000 and €8,000 a year in mortgage interest. Eigenwoningforfait: €400,000 × 0.35% = €1,400. Net deductible amount: €8,000 − €1,400 = €6,600. At the capped 37.56% rate, the annual tax benefit comes to roughly €2,479, not the roughly €3,000 you'd get by naively applying 37.56% to the full interest figure. Run your own WOZ value and mortgage details through the mortgage deduction calculator for the exact number.
See the mortgage deduction calculator in action
You don't need to submit separate paperwork during the year, your net monthly mortgage cost already reflects an estimated benefit if you requested a "voorlopige teruggaaf" (provisional refund) from the Belastingdienst, paid out monthly alongside your salary. Otherwise, the deduction gets settled once a year through your annual income tax return (aangifte inkomstenbelasting), under the "eigen woning" section, where you report the interest paid (your mortgage lender sends you an annual statement with the exact figure) and the WOZ value of your home (found on the WOZ-beschikking from your municipality). Get either the provisional refund set up or budget for a lump sum arriving the following spring, but don't forget about it entirely and assume the deduction happens automatically.
Why the benefit shrinks as you pay off your mortgage
As you pay down your mortgage balance (whether through a linear schedule, extra repayments, or simply an annuity mortgage maturing over the decades), the interest portion of each monthly payment gets smaller every year, since interest is calculated on the remaining balance. Less interest paid means less to deduct, which means a shrinking annual tax benefit over time, even though your gross monthly payment on an annuity mortgage barely changes. In the last years of a mortgage, some homeowners end up with an eigenwoningforfait that's actually higher than their remaining deductible interest. In that case the "Wet Hillen" rules kick in, gradually phasing out extra tax on that surplus rather than taxing it in full, so paying off your house doesn't suddenly create a tax penalty.
This article reflects Dutch tax rules as of 2026. It is not tax advice, consult a qualified belastingadviseur for your specific situation.