Tax treatment of a loan

In 2001, the Dutchman has changed the tax rules. When you earlier in the interest of debt relief that, you can now only in some cases. The tax is a distinction between two types of debt: Debt in Section 1 (property) and liabilities in box 3 (other debts).

Debts in Box 1
The most common failure in Box 1, the debt that funds are used for the acquisition, improvement or maintenance of property. The result is that the interest deduction to take the form of income tax. Very important to know is that with respect to property ownership to their primary residence is usually where you live, and therefore registered. And renting a garage or an investment property are not own homes. The debt does not have a mortgage. It may also be a private or personal loan or credit are ongoing. However, therefore, the money used for the acquisition, improvement or maintenance of property.

Debts in box 3
Debts in Section 3, its debts that are passed on to other business outside their home. Think of a personal loan to buy a car, the portion of the mortgage that is used for the purchase of a car, or a revolving credit temporarily to absorb the costs. The level of interest is not important for the treasury. However, the average level of debt in one year, with a small threshold (for example: own risk) the ability to reduce the box 3. This can prevent the yield of energy. For example, if you have an overall debt of 20,000 euros and a capacity of 55,000, the debt can be assured that we should not 1.2% to the IRS. Of course, the question is whether it is better not to debt often expensive (10%) to replace them with the ability (with a rate of 4%). So we can leverage through a 6% annual savings