We have three boxes for income tax. How do you declare a loan in box 3 for income tax? Which loans can you specify in box 3 and what do you get from that? Calculate your benefit yourself. Not all your loans and debts are deductible in box 3, and it is also important whether you have a tax partner because then the debt threshold will be higher in 2019, 2020 and 2021. An inheritance can also be box 3 and a donation on paper is also a debt in box 3. So there are plenty of options.
Loan in box 3
There are three boxes on the income tax return. However, a private individual who does not have a significant interest in a company only has to deal with box 1 or box 3:
- Box 1 contains your loans and mortgage that relate to your own home, your home acquisition debt. These can be loans for the purchase of your house but also for improvements to your home. Mortgage and loans that you can prove are used for your home. An exception to this is a residual debt from the sale of a previous owner-occupied home.
- All other loans end up in box 3. This could be the mortgage of a second home, a second mortgage on your own home, the loan for a caravan, car, loan for a share package, overdraft with the bank, a personal loan, a revolving credit, a holiday loan, other debts. . The residual debt ends up in box 3 if the debt arose after January 1, 2018. A residual debt that already existed before January 1, 2018 is linked to box 1, the interest on your residual debt is a tax deductible item in box 1. Also a high interest on the A loan for a residual debt can therefore be tax deductible in box 1 of income tax.
What is box 3 of income tax?
Box 3 of the income tax contains a net statement of your assets and possessions, other than your own home. You pay tax on this capital if you exceed the exemption of more than 30,000 euros (2019, 30,846 euros in 2020 and 50,000 euros in 2021 respectively). So if you have a net asset of 100,000 euros, as a single person you will pay tax on 70,000 euros in 2020, approximately 375 euros. The tax authorities assume that you will make up for that tax with the return you make on your assets. The tax authorities are not interested in whether that is the case. This arrangement means that if you receive 0.5% interest on a savings account, you will immediately have to pay a large part of it, or more than that, to the tax authorities. And yet the interest you pay on a loan in box 3 is not tax deductible.
Pay less tax in box 3
However, if you have debts, you can pay less wealth tax by partially deducting these loans from your assets. If you have a tax partner, this is also allowed with your partner’s debts. The same applies to any debts of minor children over whom you or your partner exercise parental authority. A mortgage in box 3 can also yield more money than a mortgage in box 1.
Valuation of debts
The value of the debts and loans is the economic value. It is often clear what amounts are involved, but sometimes loans are linked to the value of shares or bonds that can fluctuate in value or conditions are attached to a loan that can make a loan more or less valuable. It is also important that only the value as of January 1 of the year counts as a deductible item. If you have a personal loan of 20,000 euros as of January 1, 2020 and repay a large part of it during 2020, the amount of 20,000 euros will count for your 2020 tax return and 20,000 euros will count for your 2020 tax return, minus what has now been repaid in 2020.
Debt threshold 2019, 2020, 2021, per person:
- 2021: 3,200.
- 2020: 3,100.
- 2019: 3,100.
Valuation of rented property box 3
A rented home is assets in box 3, but that does not mean that the entire value must be included. You may be able to use the vacant value ratio.
Debt threshold and reference date, calculation of your tax benefit
The reference date is therefore January 1, but there is also a debt threshold that you must take into account when making your deduction. You may not deduct all your debts in box 3. There is a debt threshold of 3,000 euros per person in 2018. In 2019, 2020 3,100 euros and in 2021 3,200 euros, so slightly higher. Together with your tax partner, you have a debt threshold of 6,000 euros in 2018 and 6,200 euros thereafter. So suppose you and your partner have a personal loan of 20,000 euros, then you may deduct 13,800 euros in box 3 in your 2020 tax return. That may save you 200 euros in tax. Not a big deal, but always a bonus. The inheritance tax that has not yet been paid can also be entered as a debt in box 3.
- Capital gains tax 2019, 2020 and 2021