Dutch income tax: Box 1, 2 and 3

The three boxes

The Belastingdienst (the Dutch tax office) sorts your income into three boxes. Each box has its own rules and rates, and you pay the tax of all three in one tax return:

Most people only have Box 1, and Box 3 if their savings and investments are above the tax-free amount. Each box is taxed separately: a loss in one doesn't lower the tax in another. The tax credits (heffingskortingen) are the exception. They come off the total tax, and what you have in Box 3 can make them smaller.

Box 1: income from work and your home

Box 1 is tax on income from work and your home. It covers your gross (before tax) salary, profit as a freelancer, unemployment and sickness benefits, alimony, and, once you've stopped, the AOW (state pension), your pension through work (pillar 2) and a lijfrente's payouts. Your employer takes the tax off your salary each month, as wage tax (loonheffing). The tax return then works out what you really owe for the year.

Some things come off your Box 1 income before the tax is worked out. The premium for your pension through work is one: it's taken off your gross salary, so you pay no tax on it now and pay it on the pension later. Lijfrente contributions and mortgage interest come off too, as deductions in your tax return. What's left is your taxable income (belastbaar inkomen), and that's what the brackets apply to.

The 2026 brackets

Box 1 has three brackets. Each rate applies only to the part of your taxable income in its bracket, so a raise into a higher bracket never leaves you with less:

The rate in the first bracket is income tax plus premiums for the AOW and the other national insurances (volksverzekeringen). From your AOW age you no longer pay the AOW premium, so the first bracket drops to 17.85%. That's why the same pension costs less tax once your AOW has started. In the year you reach your AOW age, the first bracket rate is between the two, depending on your month of birth. People born before 1946 have a slightly longer first bracket.

Tax credits

Tax credits (heffingskortingen) come off the tax the brackets give, not off your income. Two matter most while you work:

• The general tax credit (algemene heffingskorting) is at most €3,115 in 2026. It gets smaller as your income rises above €29,736, and is gone at about €78,400. The income that counts here is your Box 1 income plus your Box 3 income, so savings and investments above the tax-free amount make it smaller.
• The labour tax credit (arbeidskorting) is only for income from work. It grows with your salary up to €5,685 at €45,592, then gets smaller as your salary rises further.

From your AOW age the credits change. The general tax credit is about half, and you only get a labour tax credit if you still work, at a lower amount. In its place you get the older persons' tax credit (ouderenkorting), if your income isn't too high.

Pensions and a lijfrente

Every pension is taxed in Box 1, when it's paid out. That's the pattern: no tax on what goes in, tax on what comes out.

• The AOW is Box 1 income from your AOW age. The SVB takes the tax off before paying you.
• Your pension through work is Box 1 income once it starts. The premium you paid while working wasn't taxed, so the payouts are.
• A lijfrente (pillar 3): your own pension savings, with tax back now. What you put in comes off your Box 1 income, up to your Jaarruimte: how much you can put in a lijfrente this year and deduct from your income. You get tax back at your highest bracket, and the payouts are taxed in Box 1 later, often at a lower rate. While it grows, a lijfrente isn't counted in Box 3. The Lijfrente guide explains the rules.

Your savings and investments are the other way round. You put in money you've already paid Box 1 tax on, and then pay Box 3 tax on them each year.

Your home

The home you live in is in Box 1, with its mortgage. Two things go into your Box 1 income:

• The eigenwoningforfait, a small part of your home's WOZ value (the value your municipality sets each year), is added to your income. For most homes it's 0.35% of the WOZ value in 2026.
• The mortgage interest comes off your income, if the mortgage is for the home you live in and you pay it off within 30 years. The tax back is at most 37.56% of the interest in 2026, even if you're in the top bracket.

A second home, or a home you rent out, isn't in Box 1. It's in Box 3, as an investment.

The hypotheekrenteaftrek guide explains both, with the 30-year limit and what changes once you retire.

Box 2: a large stake in a company

Box 2 is for income from a substantial interest (aanmerkelijk belang): owning 5% or more of a company's shares, alone or with your fiscal partner. That's usually someone with their own BV (a private limited company). Dividends they pay themselves, and the gain when they sell the shares, are taxed at 24.5% up to €68,843 and 31% above it. Their salary from the BV is in Box 1.

Shares in listed companies, funds and ETFs aren't in Box 2 unless you own 5% of the company, so for almost everyone they're in Box 3.

Box 3: savings and investments

Box 3 is tax on savings and investments. It looks at what you own on 1 January, not what you earned. In 2026 the first €59,357 a person is free of it, or €118,714 together with a fiscal partner. On the rest, the tax office assumes a return, such as 1.28% on savings and 6% on investments, and taxes that return at 36%. The Box 3 guide explains how it's worked out, and what changes from 2028.

What the example household pays

If the first partner put €6,500 into a lijfrente, their taxable income would fall to €61,500. They'd get €2,441 back at 37.56%, and €416 more general tax credit, because it grows as their income falls. That's €2,857 less tax, 44% of what they put in.