Your property investment in box 1 or box 3?

30-9-2021 — 

When you rent out your house(s), you obviously want to achieve the highest possible return. So, you probably think it is best to do most work yourself concerning the rental process and the management. However contradictory that may sound, for tax reasons it can be better to choose to outsource both the rental and the management to a professional. Especially if you have little other income. Outsourcing work off course costs money. As a side effect, you are relieved of the burden when you outsource work.
But of course you want the rental income to be taxed in box 3 (capital gains tax), which is a much lower tax burden than if it were taxed in box 1 (income). Certainly a landlord, who owns several properties and has little other income, will need to limit his/her own involvement and work as much as possible for this reason!

When will the Tax Authorities accept box 3?
If you can show that you outsource the work on your property(s), then the Tax Authorities will almost certainly accept box 3. However, if the Tax Authorities are of the opinion that you carry out all the work yourself, thus actively letting and managing the property, then the investment may shift from box 3 to box 1. This is certainly the case if you have little or no income from work. And that can have a significant negative impact on your return.

Rental income is (still) untaxed in the Netherlands
The rental income from an investment in real estate is in principle untaxed in the Netherlands. Although the PvdA is threatening to introduce a ‘Prince Bernhard tax’ for landlords with multiple properties, but we do not expect this to become reality soon. There is also an important advantage to box 1; you can deduct costs. That is not allowed in box 3.

Do you have questions about taxes on your rented property(s)? We recommend that you discuss this with your tax consultant or accountant at all times. He or she can best advise you based on your personal situation.

If you let us take care of the rental and/or the management, you are not only guaranteed a carefree rental, but you will also receive a higher return than if your properties were taxed in box 1.

Afbeelding van Steve Buissinne via Pixabay