In short: The Netherlands levies income tax through three boxes. Box 1 (income from work and own home) has three brackets in 2026 for people below the state-pension (AOW) age: roughly 35.75% up to about €38,900, roughly 37.56% up to about €78,400, and 49.50% on everything above (as of 2026; if in doubt, check the official source). Box 2 taxes income from a substantial shareholding (24.5% / 31%), and box 3 taxes wealth (a 36% rate with a tax-free allowance of around €59,000 per person). Tax credits such as the general credit (max. ≈€3,115) and the labour credit (max. ≈€5,685) reduce the bill. This is general education, not tax advice.
Dutch income tax is built around three so-called ‚boxes‘, each with its own rate and rules. Box 1 covers income from work and your own home, box 2 covers a substantial shareholding in a company, and box 3 covers savings and investments. On top of that, tax credits (heffingskortingen) reduce the final bill. This chapter explains the fundamentals so you can make better sense of your payslip and your tax return. It is educational, not tax advice — always check figures against the official source.
Work out which box your income falls in: box 1 (work and home), box 2 (substantial shareholding) or box 3 (savings and investments). For most people box 1 dominates.
Calculate your taxable income in box 1 and apply the brackets: a lower rate on the first slice, a higher rate on income above it.
Subtract the tax credits: the general tax credit (algemene heffingskorting) for everyone and the labour credit (arbeidskorting) if you work. These cut the tax due directly.
File your return with the Belastingdienst for the tax year (calendar year) before the deadline and settle it against the wage tax already withheld.
What matters
Dutch income tax uses a box system. Each type of income falls into a box with its own rate.
Box 1 — income from work and home — affects most people. It is progressive: you pay a lower rate on the first slice of income and a higher rate on income above it. In 2026, for those below the AOW (state-pension) age, there are broadly three brackets: about 35.75% up to roughly €38,900, about 37.56% up to roughly €78,400, and 49.50% above that. People who have reached AOW age pay a lower rate in the first bracket, because they no longer pay AOW (state-pension) contributions.
Box 2 taxes income from a substantial shareholding (owning at least 5% of a company), with two 2026 rates: 24.5% on the first roughly €68,800 per person and 31% on the excess. Box 3 taxes wealth — savings and investments — with a tax-free allowance of around €59,000 per person and a 36% rate on the taxable return.
Once tax per box is calculated, the tax credits apply: the general credit and, for workers, the labour credit. These are subtracted from the tax and are often already built into the monthly wage withholding. The Belastingdienst (tax authority) collects the tax and processes your annual return. This chapter is for education and is expressly not tax advice.
ExampleExample (simplified, as of 2026): someone below AOW age earns €50,000 gross. On the first ≈€38,900 the rate is ≈35.75% ≈ €13,900; on the remaining ≈€11,100 the rate is ≈37.56% ≈ €4,170. That is roughly €18,070 of box 1 tax before credits. You then subtract the general tax credit and the labour credit (easily several thousand euros combined), so the actual bill comes out considerably lower. Figures are rounded — verify the exact brackets and credits with the Belastingdienst.
Box 1 (work and own home) is progressive with several brackets; box 2 (substantial shareholding ≥5%) has two rates; box 3 (savings and investments) taxes wealth above a tax-free threshold. Because the boxes are separate, the same household can have income in more than one box at once, each with its own calculation.
Box 3 is changing
Box 3 is very much in flux. Following Supreme Court (Hoge Raad) rulings, you may demonstrate that your actual return was lower than the deemed flat-rate return, and the government is working towards a system based on actual returns. Figures and methods may therefore change — for 2026 always consult the current information from the Belastingdienst.
Not advice
This chapter explains the main lines for educational purposes. It is not tax, legal or financial advice. For your personal situation — benefits, deductions, fiscal partnership — consult the Belastingdienst or a tax adviser.
Checklist
Understand that income tax flows through three boxes (work/home, substantial shareholding, wealth).
Know that box 1 is progressive: a higher income means a higher rate on the top slice, not on everything.
Recognise tax credits as a direct reduction of the tax owed.
Equate the tax year with the calendar year and check the filing deadline with the Belastingdienst.
Common myths
Myth: If I move into a higher bracket, I pay the high rate on my whole income.
Reality: No. The system is progressive per bracket: the high rate applies only to the part of your income above the threshold. The part below stays taxed at the lower rate. Earning more therefore always leaves you with more net income.
Myth: Savings stay untaxed because there is an allowance.
Reality: There is a tax-free wealth allowance in box 3 (around €59,000 per person in 2026), but wealth above it is taxed at 36% on the calculated return. Above the allowance you do pay tax on your savings and investments.
Frequently asked questions
What is the difference between box 1, box 2 and box 3?
Box 1 taxes income from work and your own home (salary, profit, pension) at progressive brackets. Box 2 taxes income from a substantial shareholding — at least 5% of the shares in a company. Box 3 taxes wealth such as savings and investments. Each box has its own rate and rules.
What are heffingskortingen (tax credits)?
Tax credits are reductions of the tax you owe. The general tax credit applies to almost everyone and tapers off at higher incomes. The labour credit applies if you work. Together they can substantially lower your bill, and they are usually already factored into your monthly wage tax.
When do I have to file?
Income tax covers the tax year, which equals the calendar year. You file the following year with the Belastingdienst, usually from 1 March, with a typical deadline of 1 May (extensions are possible). Check the exact date on belastingdienst.nl.
