Whoever takes out a loan automatically has a debt. This debt has disappeared when the payment has expired and the consumer has complied with the agreements concerning the payment. Interest is charged on these periodic installments. The BKR advises consumers and companies on loans.
It is very important that the loan you take out does not provide a debt that cannot be repaid in a realistic way. Borrowing costs money. It is also important for the other party, the provider of the loan, that the applicant for the loan will be able to pay it back.
If the consumer can get the interest back from the tax authorities, this will simplify the payment and possibly speed it up. This makes it possible to pay off earlier than the agreed period. This is always encouraged, and sometimes even rewarded with a reimbursement.
Until 2019, all interest on consumer credit was tax deductible. The rules for this have been tightened since 1 January 2019. Only in some cases is the revolving credit still tax deductible.
With personal loans, there are two forms that are deductible. The first is when the loan is used for the purchase, renovation or improvement of your own home. It is important to keep a proper record of the costs of this and to put it in an overview as proof of the use of the loan.
Exceptions to expenses are for example the purchase of furniture, these are purchases with self-interest. When you use the borrowed money to build a new kitchen or bathroom, for example, it is deductible. As a result, it is possible that only part of the revolving credit will be deductible.
The second option is when the loan is used to pay off the residual debt of a home. This interest is deductible for a maximum period of 15 years, provided that the residual debt arises after October 29, 2012. Both are deductible only when it affects your main residence, not in the case of a possible second home.
The interest paid on a Good Finance credit is also tax deductible. With a Good Finance credit it is always about a house for sale, rental homes are not covered.
An advantage is that the interest is often lower than with a revolving credit, because the lender runs less risk. Furthermore, this loan is very similar to a personal loan. It also applies to the Good Finance credit which is only deductible if the money is used for the purchase, improvement or renovation of the home.
So-called “Consumer Loans” have not been deductible from income since 2019. For example, buying a car, new furniture for the home, being able to use a more luxurious lifestyle, etc. are not deductible costs.
A large part of the loans, therefore, falls into a non-deductible scheme with the tax authorities, which means that you will have to pay the interest on the loan in full yourself.
Student finance was converted into a gift upon earning a diploma. However, since 2015-2016 this is no longer the case and a new arrangement has been made. Student finance is a loan with an exceptionally low interest rate, but this interest is not deductible at the tax authorities.
You can, however, deduct the debt itself when determining your entire assets, if the debt arose after 1 September 2015, or if you were not entitled to a deduction for school expenses when the study debt arose. However, deducting this debt from your income only makes sense if you fall above the tax-free allowance. This is above € 25,000. If you are below that, you do not pay any box-3 income tax anyway and you do not have to request a deduction for this.
In fact, you can simply say that in most cases only loans for the purchase, renovation or improvement of a home are tax deductible. It is always good to look at your individual case, in case you pay more than necessary. For example, credits that are never deductible include:
– Loans for a car or second home
– Loans that are no longer a home acquisition debt through borrowing
– Loans contracted to pay for other loans
It is always recommended to contact the tax authorities in case of doubt about any deductible items. It is always nice when it appears that you have to pay less than initially thought. Therefore always check carefully whether your personal situation is covered by a deductible loan.