Mortgage interest deduction: where does it stand in 2025?

What is the mortgage interest deduction?

The rule allows homeowners to deduct the mortgage interest they pay from their taxable income, reducing the amount of income tax owed. This lowers net monthly housing costs, especially for those with higher mortgages and incomes. However, since 2014 the maximum tax relief has been gradually reduced. In 2025, the deduction in the highest tax bracket is capped at 37.48%.

Key changes since 2001

Over the past two decades, the scheme has been reshaped multiple times. In 2001, a maximum period of 30 years was introduced. In 2004, additional rules such as the “Hillen Act” and the “carry-over of capital gains” (bijleenregeling) were added. The most significant change came in 2013: only annuity and linear mortgages now qualify for interest deduction. On top of that, the Hillen benefit has been phased out gradually since 2019, and new rules have been introduced for couples buying together.

This stack of rules has made the system complicated. The Dutch Tax Authority struggles to track who is entitled to how many years of deduction, and the sharing of deductions between partners often requires new legislation. For both homeowners and officials, navigating the fine print has become a challenge.

What does it mean for homeowners and expats?

For first-time buyers, further cutbacks could reduce borrowing capacity. Middle-income households and recent buyers are also vulnerable, since many have budgeted their monthly costs assuming full deduction. For the government, limiting the scheme would save billions in tax revenue. But without adding more housing supply, it is unlikely that abolishing the deduction alone will bring down property prices.

For expats in particular, this can be confusing. The mortgage interest deduction is a unique Dutch tax benefit and not something you may know from your home country. When you move here and take out a mortgage, it can significantly lower your net monthly payments in the first years. But because the rules are changing, it’s important not to rely too heavily on it when planning long-term finances.

Political outlook in 2025

Political parties are divided. Left-leaning parties want to phase out the deduction quickly, often within 10 to 15 years. The centrist CDA prefers a long transition period of up to 30 years, so new buyers could still benefit for the full term of their mortgage. Right-leaning parties argue for preserving the scheme as much as possible.

A shrinking benefit

Regardless of the political debate, the trend is clear: the mortgage interest deduction has become less generous over time. The cap on the deduction rate, the phasing out of the Hillen benefit, and the repayment requirements introduced in 2013 all mean that the financial advantage is far smaller today than it was twenty years ago.

What should expats keep in mind?

For homeowners, it’s unlikely that the deduction will disappear overnight, but further reductions are inevitable. If you’re an expat buying in the Netherlands, it’s wise to calculate scenarios in which the deduction shrinks further. This way, you won’t be caught off guard and can ensure your mortgage remains affordable, even without this extra tax benefit.