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):