Tax-deductible loss resulting from income tax exemption

Mortgage interest deductions usually mean a reduction in taxable income from employment and dwellings. If taxpayers receive an exempt salary, the mortgage repayments can be reduced, but this does not result in a tax rebate as no tax has been paid on the salary. What does remain is a negative income that in the Netherlands is regarded as losses from employment and dwellings (box 1). The negative income in box 1 can be offset if there was positive income in box 1 in the past (carryback) and in the future (carryover).

With a carryback, the negative income is offset against the positive taxable income from employment and dwelling retrospectively for up to a maximum of three years.
If it is not possible to offset this against previous years, the negative income is offset against positive income as from eight years after this income was first received.

Ms B receives an exempt salary and has a negative income from employment and dwellings to the sum of €10,000. After eight years, a loss of €80,000 has arisen that can be offset. She is due to retire in 2013. The entire pension can then be offset against the losses over the last eight years. No income tax will have to be paid on income from employment and dwellings for that year either.

The table shows how the loss is offset and the saving that this enables.

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Year 2007 2008 2009 2010 2011 2012 2013 2014 2015  
Income 0 0 0 0 0 0 0 0 80.000 (pension)
Negative income -10.000 -10.000 -10.000 -10.000 -10.000 -10.000 -10.000 -10.000 -80.000
  0
  Income tax saving 24.300