Dutch Real Estate and Box 3 in 2022

Last week we’ve looked at what the newly proposed 2022 Box 3 (“wealth tax”) does to your FIRE plans. As you likely know we use real estate as part of our FIRE plans. What’s about to change on this front? Here is to Dutch Real Estate and Box 3 in 2022.

Disclaimer: we are not tax professionals and this is only our interpretation of the tax code. Consult a specialist if you want to make sure the tax approach is best your situation!

Why use Real Estate for your FIRE plans in the Netherlands?

With the current Box 3 system (2019), real estate investments get a big tax break. How does this work? Contrary to stocks, bond, crypto-currencies, crowdfunding, etc., where your wealth is taxed based on the actual value at the cut-off date, real estate is not!

For real estate there are several rules as how it defines your wealth (“assets minus debts”) according to Box 3 taxation. Here is my attempt to clarify how it works (values for information purposes):

  • Market value of your property (no tenants): €400.000
  • Market value of your property in rented state (so with tenants!): €380.000
  • Government assessed value (WOZ value) of your property: €360.000
  • Tax value in rented state (assuming at least 7% return on WOZ value = 85%): €306.000
  • Mortgage (70% value in market rented state): €266.000
Should you buy a castle?
Dutch Real Estate and Box 3 in 2022

Your actual wealth

Based on the above number, your net worth in real life would be €400.000 – €266.000 = €134.000. This is a simple calculation as you just take the value of the property in the open market without any tenants in it. You subtract the value of outstanding debt (your mortgage) and voila.

In case you would have to sell with tenants in it (or you want to be more conservative), you will end up with a net worth of €380.000 – €266.000 = €114.000 for this example. Both numbers assume you don’t have any sales fees.

Your wealth for tax purposes

When determining your wealth for tax purposes with regards to real estate, the government does not look at the market value. They use the government assessed value or WOZ value. This is also the value used for property taxes (OZB). This value is generally lower than the actual market value of the property.

Next, assuming you rent out the property to make money, the WOZ value is corrected using the so called “leegstandswaarde ratio”. This only applies for long term rentals! If your property is making you more than 7% return (yearly rental income over WOZ value), you correct the value of the property to 85% of the WOZ value. In the example above, this give you a property value in rented state of €306.000. If you now subtract the debts (€266.000), you end up with a net wealth for tax purposes of only €40.000!

In this case, your taxable wealth is much lower than in you would have the same wealth in say stocks. For larger wealth numbers, and especially as a couple (where you still get larger exemption amounts / can split the wealth between the two), this really starts to become interesting!

The changes from 2019 to 2022 for Real Estate investing

The 2022 proposed tax change has a particularly big influence on real estate. Firstly the whole “WOZ value in rented state” will be taxed at 5.33%. In this case that means the full €153.000 in the example above. Next you may subtract the debts (€133.000 in the example) at an average interest of 3.03%. Next, you may reduce that amount by either €400 or €800 (single vs couple) as a general income deduction. The remaining value will be taxed at 33%.

For this example:

  • €306.000 * 5.33% = €16.310
  • €266.000 * 3.03% = -€8.060
  • Reduction for a single = -€400
  • Taxable income = €7.850
  • Net tax (33%) = €2.591

If you would only have income in Box 3 (not in Box 1 or 2), you can also apply the general tax credits (“algemene heffingskorting”) at €2477 (2019 value). Leaving you with €114 in taxes to be paid. As a couple with two times the general tax credits, you would not have to pay any taxes in this example.

Pretty tax graphs

The above example is only for the proposed new 2022 tax system. But would it not be interesting to see the differences between 2019 and 2022? Also for larger real estate portfolio’s with various loan to value ratio’s? I thought you’d never ask 😉

Here are a series of pretty tax graphs (well pretty is not the right word here!). Couple of things to keep in mind:

  • Real Estate portfolio sizes are selected at €0.5M, €1M and €2.0M (in rented state), at various loan to value (LTV) ratios (i.e. your actual wealth and net wealth for taxes purposes varies greatly!)
  • LTV is based on Market value in rented state. For example, a €2,0M porfolio with 70% LTV means a mortgage of €1,4M.
  • WOZ is assumed at 90% of market value in rented state (for calculation purposes only!)
  • Taxable wealth according to the “Leegwaarde Ratio” is based on 85% of WOZ value
  • Algemene Heffingskorting (“general tax credits”) is based on 2019 numbers: €2.477 per person (also assumed for 2022 examples!)
Taxes for singles and couples with Box 3 income only, excluding Algemene Heffingskorting
Taxes for singles and couples with Box 3 income only, including Algemene Heffingskorting
Various Portfolios and associated taxes, based on same LTV ratio’s

As a note to this last graph, the taxation amount for singles and couples is nearly identical. This is because of the removal of various different tax brackets as we have now in 2019 for Box 3.


How big does your portfolio need to be to FIRE in the Netherlands using real estate? I’m not able to answer that because it depends on too many variables. It’s based on your personal Return on Investment (ROI), cash-flow, wealth for tax purposes (subject to WOZ and debts), plans for the future, expense levels for you personally, etc.

As to Box 3 wealth tax, your tax burden will likely grow substantially as of 2022, it increases relatively more if you have higher leverage constructions in your portfolio. So you will need more real estate to end up with the same net income to cover your living expenses during FIRE. If you don’t do anything from today, your cash-flow on a yearly basis will obviously get a hit.

What we don’t know for sure is if the “leegwaarde ratio” will remain, or might be updated with the 2022 tax update. What will likely happen in the future is that the WOZ value will increase too, this will be another indirect additional tax burden that may even outpace inflation and rent indexation.

That being said, I’ve also looked at the difference between FIRE portfolio with real estate and one with stocks/bonds. This has some interesting conclusions!

Personal impact

Where last week we noted an impact of nearly €200.000 in our wealth target to be FIRE in 2022. That’s a lot of money and would required us both to go back to work for the coming years to make FIRE happen in 2022.

But, due to the effect of real estate in our FIRE portfolio, the additional wealth that we would need is limited to “just” about €100.000 (or one extra rental unit). This also has to do with cash-flow and moving to another property in the coming years. So not all is lost 🙂



  1. Cheesy, thanks for the inspiring post. The government is the most unreliable contract partner there is: increasing taxes, changing laws & regulations, cutting pensions and so forth.

    Happy investing!

  2. You wrote: “That being said, for now (for most properties), real estate will still be interesting as it still limits your tax burden compared to having the same wealth in stocks, bonds or other investments.”

    I’m not sure this is strictly true that real estate ‘limits your tax burden’ or I’ve misunderstood you (possible!). My Dutch is quite poor.

    I’m using the worked examples that in the ‘geldnerd’ article that you linked to in your last post https://www.geldnerd.nl/belastingplannen-box-3/

    Assuming: cash €10,000, real estate 500,000 and mortgage at 400,000 give a net wealth of €110,000 paying tax, under the new system, at € 4.666 (with the heffingvrij deduction).

    Compare with geldnerd’s other example of cash €10,000, stocks and shares €140,000, gives a total net wealth of €150,000 taxed at €2,333.

    Obviously, it is still possible to use leverage in real estate but, as a pure comparison, for an investor with say €150,000 looking to invest, stocks/shares delivers a lower tax burden than say leveraged real estate at 70% LTV.

    Of course, we know that using leverage can increase your returns, with the associated risk, but purely from a tax perspective unleveraged stocks and shares is now relatively more attractive under the new tax regime.

    Nice blog by the way!

    1. Hello Haque,
      Albeit you might have a point here, it does not work for this example. The problem with the example of Geldnerd is the assumption of the value of the property. In his example he uses the market value (not the assessed WOZ value corrected with the “leegwaarde ratio”). The WOZ value is often around 10-15% lower than the market value. If you assume just 10% lower, and multiply by 85% for the leegwaarde ratio, the value of the property for tax purposes is now significantly lower (500K market = ~450K WOZ = ~382.5K tax value). As a side note, getting 80% financing on the market value is possible, but uncommon and difficult to obtain (albeit certainly not impossible! You just need to pay higher interest rates for it, which will affect your cash-flow).

      In this case you would be paying:
      €382.500 * 5.33% = €20.387
      €10.000 * 0.09% = €9
      €400.000 * -3.03% = -€12.120
      -€400 * 2 (couple) = -€800
      Total taxable income: €7.476
      Tax: €2.467, which is higher than the stock portfolio indeed!

      1. Thanks. I’ll take a look. I think you might make be making an error in the way you calculate this. But I hesitate to argue with smart people so I’ll take another read through 🙂

      2. In the current tax calculations, the above determination of what constitutes as wealth (assets minus debts) in Box 3 is correct (the tax program we filled out online to submit our taxes confirms this). However, if this will be the same for 2022 is to be seen. The details are not know yet, so it is my assumption at this stage that it’s done the same way, until proven otherwise.

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