Changes to the way your second home is taxed in box 3 of the tax return

When you declare assets in box 3 of your tax return for 2026 and 2027, two calculations will be made. The first uses the government-assumed rate of return on your assets, which is the same for everyone.

Under the rebuttal scheme for taxation according to actual return, a second calculation is carried out to check whether your actual return is lower than the assumed return. If it is, the tax payable on your assets in box 3 will be calculated on the basis of your actual return. The tax rate in box 3 remains at 36%.

The ‘WOZ’ value of your holiday home, i.e. the value as assessed by the local authority, is used to calculate the return. For your 2026 tax return, you use the WOZ value with a reference date of 1 January 2025.

For your 2026 tax return, the tax-free allowance for box 3 is €59,357 per person. Both tax partners are entitled to this allowance. For a holiday home classified as ‘other property’, the assumed return is 6% of the WOZ value.

If you’ve taken out a loan to buy the holiday home, you can deduct a notional interest amount from your income declared in box 3. This interest rate has been provisionally set at 2.67% for 2026.

Assuming a return of 6% and a tax rate of 36%, the effective tax rate works out at 2.16% of the WOZ value. This means that, excluding the tax-free allowance, you will pay €2,160 per €100,000 of WOZ value annually in tax on your holiday home in box 3. Particularly for owners of holiday homes on the coast, the tax burden can, therefore, increase considerably.

Is your actual return lower than the assumed return? The tax payable in box 3 will then be calculated based on this lower actual return.

Factors relevant to the actual return include the following:

• Rental income from your holiday home
• A notional rent of 5.06% of the WOZ value if the property is vacant or used by yourself only
• The interest actually paid on a loan you have taken out to buy your holiday home
• The increase in the WOZ value over the course of a year

Maintenance costs may not be deducted. If the WOZ value has increased due to investments such as a renovation, you may deduct the amount equal to this increase in value from your actual return. The total of all box 3 assets will be considered in calculating the actual return. A possible tax-free allowance must not be taken into account.

The intention is to switch to a new system for box 3 assets as of 1 January 2028. Under this new system, the actual return will be taxed. The tax-free allowance as it is today will be abolished. Instead, there will be a tax-free income allowance of €1,800. The tax rate appears to remain at 36%.

Property declared in box 3 will be subject to capital gains tax. This means that rental income will be taxed and that maintenance costs or the interest on a loan will be tax-deductible.

Has the value of your second home increased? Any increase in value is subject to tax when you sell the property. That’s a practical principle: you pay tax when you actually receive the money. However, there are a number of additions:

• If you’re not letting the property, 3.35% of the WOZ value will be added to your income in box 3. Maintenance costs and interest paid will be tax-deductible.
• Properties declared in box 3 on 1 January 2028 will be taxed based on the WOZ value for the 2029 calendar year (reference date: 1 January 2028). Upon sale, the difference between the sale price and the WOZ value will be taxed. On 1 January 2028, a higher WOZ value may therefore work in your favour.
• When you sell your second home, you may deduct the cost of investments in the property from your capital gain. Given that there may well be many years between these investments and when you sell the property, it’s important to keep your records in order to be able to deduct these investments.
• A possible increase in the value of your holiday home will also be taxed when you enter into a community of property, get divorced or die. You will then have to pay tax without the money for it being available yet. There may still be adjustments for situations relating to marriage and divorce.

Many holiday home owners are dissatisfied with the assumed returns that are currently used for taxation of assets declared in box 3 of the tax return. Furthermore, the rebuttal scheme for the years 2026 and 2027 works out unfavourably for them. The system to be implemented in 2028 will bring improvements. The annual tax burden is likely to be lower, but tax will still be payable on any capital gain when it is realised. Furthermore, the new box 3 system will still involve a degree of assumed income. The cost deduction is a positive addition, and investments will be taken into account. It may, therefore, be a good idea to postpone certain expenses and investments for your second home until 2028.