Tax Declaration and Returns

Tax Declaration and Returns

Two weeks ago (when this article comes out) I did my taxes for 2018. I found out, the government owes me a nice chunk of money! On my tax declaration I get to receive almost 2,000 euros back.

Taxes in The Netherlands

Earlier I wrote about taxes here in The Netherlands. We are a country that likes to tax individuals and still is a tax haven for multinationals. Something about that doesn’t feel right, especially since I know that every additional euro I earn over my current salary is taxed at 49% and will be taxed at over 50%+ soon.

So we basically tax individuals on their income (ok), the virtual income they receive from owning their primary residence (uh, what?), and their wealth (that’s fine). Let’s keep the tax on a substantial interest in a limited company out of scope here.

So we get taxed hard on income, and then also on our primary residence. The way the latter works is kind of complicated, but just assume you have to add a small percentage of the value of the home to your taxable income every year.

Variable Income Taxation

One of the reasons I get back some money is that my income was variable. I do have a regular monthly salary, however, I also receive the occasional bonus. Then next to that, in 2018 I switched jobs and received a large cash payment from my old company, paying out my leftover holidays.

The way my income tax withholdings are calculated is they take the monthly payment, multiply by 12, then look up the applicable tax rate for the yearly amount, and tax you on that.

Since we have a progressive tax system, when I receive a bonus and my income maybe is double what a regular month is, the withholdings are a bit too high too. In the end, when you finish your tax declaration, that is evened out.

Long story short, due to my variable income consisting of bonuses and one-time payments I paid too much in income taxes during the year.

Deductions

Then, of course, we get some deductions. It seems impossible to create a tax system that works without rules, exceptions, and exceptions to those exceptions.

I can deduct some expenses that come with owning a home as well. For one, I can deduct the mortgage interest I paid. I’m even allowed to deduct one-time expenses paid when buying or refinancing a house!

Last year I did refinance my apartments, which lowered my interest payments and left me with nearly 28,000 in cash!

Among the costs to refinance there were the notary, appraisal, and an interest penalty I had to pay the previous bank. All of these are deductable as well!

So in total, everything combined made that I will be receiving 2,000 euros, probably somewhere in June.

Did you already do your taxes? What do you owe or get back?

Share This With Your Friends!

4 thoughts on “Tax Declaration and Returns”

  1. For the first time in my life, I managed to have a result of €0 to be paid/received for both my wife and myself (balanced to be below the €15 threshold)! This is due to a very detailed preliminary tax return estimate I filled in last October, as I don’t want to wait until June the next year to receive tax back from the government. And my tax situation is not simple; two types of mortgages, a family-bank construction, wealth tax, foreign dividend withholdings and tax deductible life annuity contributions.

    • Sounds complicated indeed, but very cool you managed to plan your taxes in such detail! For my, the tax return is mainly driven by the apartment refinance. That means next year I will be a lot closer to the 0 mark, although I still expect a little return.

  2. I always have to pay something. This year it’s less than last year, which is a relief. However, 0 sounds much better and getting money back is of course the holy grail. So perhaps it’s about time to buy a small apartment ;)

    • Paying taxes end of year means you’ve borrowed money for free. If you account for that during the year it’s the best scenario. Last year I effectively loaned a couple thousand to the government. So although the return is a nice extra when paid out, it’s not by definition the best strategy to go for large tax returns.
      I agree with you 0 is the holy grail. Really hard to get there though…

Leave a comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.