August 2016 Cheesy Index (and Box 3 Tax considerations)

The Cheesy Index made a remarkable recovery in August. This was primarily due to the amazing Savings Rate that we were able to obtain, for details see here. But also due to a very happy Mr. Market.

However, we discovered two things this week and both have a major impact on the Cheesy Index. The main reason is as follows, thanks to a post by Financieel Vrij, (sorry in Dutch only) we discovered that we overestimated the amount of taxes that we have to pay during FI. This to the amount of up to €4500 per year, as we were of the impression that the general tax break did not apply to Box 3 income (details to follows in a later post). Apparently, it does and will provide us with a massive tax savings. The result is that our previously calculated target net worth, can be significantly lowered (by as much as €100.000 or more!).

Furthermore, we are in the process of a property swap from our company to us personally. The lawyer (aka the “Notaris”) actually pointed us in the direction of a tax law that also applies to real estate which is held personally and declared in Box 3 . The good thing here is that the value of the property, when used as a rental, is assigned a lower value for taxation. How much lower actually depends on the assessment value (or “WOZ” value as determined by the local municipality) and the yearly rental income. We found that for us it can be lower by as much as 15 to 38%. Why is this a good thing? Because our wealth tax in Box 3 is based on this corrected property value (and not the actual market value), which will result in lower overall taxes.

In short, we have over estimated our taxes now and during FI. We therefore have to redo some calculations, update our new target net worth and associated Cheesy Index. Expect a higher Cheesy Index next month!

The Cheesy Index up to August 2016 is as follows (still a solid, albeit significantly under estimated, 48.1% complete):


  1. Yes, algemene heffingskorting is of great help, especially if you keep your monthly expenses low. Then it contributes significantly to the amount of money you require for FIRE!

    1. Hey Mr. FOB.
      and that is exactly what our plan is. It actually got us thinking, at what point can you get to €0 taxes with just your net worth. Should be a simple calculation, but still would like to see how much it is.

      1. Wow, you really went for this one eh? We calculated in about the same ballpark (2017 calcs). So for a couple you would have double that. As we assume 4% for our SWR (primarily because we have some real estate and lots of north American stocks) and would then have about €16000 of investment income (Box 3 only) that is exempt from taxes (sort of). That is already quite a bit!

  2. Well that’s just awesome CF! You guys must be so happy, haha. To suddenly know you can make do with $100K less must certainly make things easier. Are you changing your plans now? Or are you just going to take it as a massive bonus?

    Looking forward to the next post.


    1. We certainly had a good weekend after we found out! We are going to take it as a massive bonus and will adapt our plans accordingly.
      We have actually also been discussing the option for Mr. CF to stop working in 2017/2018 when the little one has to go to school. Mrs. CF still loves her job and would like to continue. Mr. CF in this case would start doing some consulting work in personal finance to those looking for “alternative” advise and guide people forwards FIRE.
      Thanks for the visit Tristan!

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