Wait, you have to pay income tax on income you could theoretically receive? I'm fascinated to know what possible justification there is for this?
(Genuine, not rhetorical question.)
(Genuine, not rhetorical question.)
The reasoning is that housing represents an asset that should not be bought just for speculation, i.e. buy it and let it sit empty until the price is high enough for the investor to make a good profit. Of course they're free to do just that, but all housing which people can live in, are taxed as if you had that income.
Its created to prevent people from accumulating real-estate and renting it.
Penalises accidental land lords when you inherit property from your parents grand parents.
Don’t worry, I don’t think we’ll see this apply to too many lower-income (aka little) people in America.
And this was about the Dutch tax system.
But hey, if you make above their estimation, you don’t pay extra. But if you don’t invest, you still pay...
I really like how simple it makes the tax calculation (at least when you know how to value your assets).
The actual calculation is a mix from all the brackets. E.g. if you have 1 million euro, then 71.650 is taxed at 0.58%, the bulk at 1.33% and a bit at 1.68%.
The progression goes as follows (I'm too into this apparently, forgive me):
----- BRACKET 1 -----
Until € 71.650
You save: 67% @ ROI of 0.13%
You invest: 33% @ ROI of 5.6%
Average ROI: 1.935%
Taxed: 1.935 * .3 = 0.5805%
----- BRACKET 2 -----
from € 71.651 until € 989.736
You save: 21% @ ROI of 0.13%
You invest: 79% @ ROI of 5.6%
Average ROI: 4.451%
Taxed: 4.451 * .3 = 1.3353%
----- BRACKET 3 -----
From € 989.737 to infinity and beyond
You save: 0% @ ROI of 0.13%
You invest: 100% @ ROI of 5.6%
Average ROI: 1.935%
Taxed: 5.6 * .3 = 1.68%
Source (Google Translate works relatively well): https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/...
Its also odd that if say you get a ten bagger and turn 5k into 50k for a 45k capital gain you don't pay tax on that capital gain.
It would make sense and be firer to tax income and capital gain different and on actuals.
That does mean you can't use your own home as a safety for when you're old and poor, but that doesn't necessarily make the tax bad. It just means you have to change strategies and invest your money productively. In practice I'd expect the number of people who suddenly find themselves unable to afford even just the tax on what they'd have to pay to rent their own property to be quite small.