Selling your home: how taxes come in to play

If you’re selling your home, it’s essential to understand how taxes come into play. In most cases, you won’t have to pay taxes on the sale proceeds, but there are some situations where tax obligations may arise.

Taxes on Sale Proceeds

In the Netherlands, the profit you make from selling your primary residence is generally exempt from income tax. This means that you don’t need to pay taxes on the profit. However, if you don’t use the equity from the sale to purchase a new home, it could affect your wealth tax.

Equity and the Dutch “Bijleenregeling”

If you sell your home for a profit and don’t reinvest the equity within three years in a new property, this amount is considered part of your assets. This could lead to higher wealth tax (box 3) in your income tax declaration.
The “bijleenregeling” (home equity rule) also applies: if you don’t use the equity to purchase a new home, you may lose your full mortgage interest deduction for the new mortgage.

Tax-Deductible Costs When Selling

Selling your home often comes with various expenses, and some of these costs are tax-deductible, such as:

• Appraisal Costs: If you need to have your property appraised, these costs are deductible.

• Penalty Interest: If you pay a penalty for early repayment of your mortgage, this amount can also be deducted.

• Mortgage Deregistration Costs: The notary fees for removing your mortgage registration are deductible as well.

Note: Real estate agent fees for selling your home are not tax-deductible.

Conclusion

While you typically don’t have to pay taxes on the profit from selling your primary residence, it’s important to be aware of the “bijleenregeling” and any potential effects on your wealth tax. Additionally, some expenses incurred during the sale are deductible. Make sure to familiarize yourself with the tax regulations that apply to your situation to avoid surprises.