Selling house & taxes, what is allowed and what is not?

What are you allowed to do with your surplus value from the sale? Find out!

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House selling taxes

When you want to sell your house and you have a surplus value on your home, of course you wonder what to do with it. Of course, another issue is, you’re going to sell your house and does that come with taxes? How does the IRS look at this? At the time you are going to sell it is therefore wise to determine what you are going to do with this surplus value. There are various options and differences when it comes to buying a new house or using the money for other things.

What is the surplus value?

The surplus value of your house is the difference between the (remaining) mortgage and the house value, everything in between is surplus value. If this amount is negative, then we are talking about residual debt. In today’s day and age, many people have excess value. When you sell your home you can use the excess value to put into your new home. The surplus value ensures that you have less financial risk when house prices fall.

What can you do with the surplus value?

You can do anything you want with the surplus value. Even if you make a profit, there is no one who can forbid you to do it. If you are planning to buy a new house in the near future it is different. The tax authorities have a ‘top-up scheme’, then if you use the surplus value of your old house in addition to the future mortgage to buy a new house, then the tax authorities allow you to deduct mortgage interest on your tax return. If you do not use the excess value to buy a new home, then you may not use the mortgage interest deduction.

How much tax do I pay after selling my house?

If you buy another home within 3 years of selling your home, it means you’ll have to deal with some tax rules for using the excess value. These rules are also called the additional loan rules.

To deal as efficiently as possible with the additional loan scheme, it is important to know when you are no longer entitled to deduct interest. This is the case when your surplus value is not used to purchase a new home.

If you want to know more about the top-up regulation and how to apply it, we recommend you contact a mortgage consultant.

Tax and surplus value

In the Netherlands we do not pay tax on the profit of the house, so it may happen that a considerable amount is released at once. If you have not bought a new house with the surplus value of your home, you only have to pay tax when the house is sold. There is also a chance that the surplus value, therefore equals the capital in box 3 (savings and investments).

What expenses are deductible on sale?

  • Deductible expenses on sale
  • Cost of Mortgage Advice
  • Mortgage deed
  • Cancellation costs
  • Costs of applying for NHG (National Mortgage Guarantee)
  • Self made costs for closing a loan (eg telephone and travel costs

Non-deductible expenses on sale

  • Agency fees, e.g. the broker’s commission is not deductible
  • Transfer tax and VAT
  • Notary fees
  • Costs of renovation and maintenance,
  • Energy label
  • Appraisal costs

Tax return after selling your home

If your home has excess value or residual debt, this will ultimately affect your tax return and what you owe the tax authorities. In the annual tax return, you must declare the sale and purchase separately. When you sell, you always report the sales price minus the selling costs incurred, such as brokerage and the remaining mortgage amount. In this way, you give the tax authorities the surplus value or residual debt.

If you are not sure about your tax return, it may be useful to look at it with a tax adviser. Through mijnonlinebelastingadviseur you can easily schedule an appointment with an adviser.

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FAQ

Check out the frequently asked questions about taxes & selling a home below.

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How much tax do you pay when selling a house?

When you are going to sell your house, it may affect your mortgage or loan. The amount of deductible interest will therefore increase or decrease.

This depends on the date you sell your home and the date you move into your new home.

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Sell house and then rent?

If you rent and do not buy another house within 3 years after selling your home, you will have to deal with a number of tax rules for the use of the surplus value. These rules are also called the additional loan rules.

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Selling your house and emigrating – tax?

If you sell your home and emigrate, the income from the home is taxed in Box 3.

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