Jubelton is gone, but there are still plenty of ways to give him the tax break

The scheme was very popular right away, but it did not last long. Next year, tax authorities will limit the generous opportunity to donate the money that has come to be called “Jubilton.” Of the amount allowed to support children in buying a home, renovating or paying off a mortgage, a quarter remains.

Jubilton came shortly after the financial crisis, with many owner-occupied homes falling “underwater”. To boost the housing market, parents were allowed to give their children up to €100,000 tax-free in 2013 and 2014.

After a short break, the temporary arrangement took on its current form from 2017 onwards. People other than their parents are now allowed to make a large tax-free donation from 18 to 40 years old. The amount has now risen to 106,671 euros due to the measure.

In practice, the scheme has mainly helped young buyers improve their competitive position in the housing market, according to financial planner Richard Bloedijs of Lemen, northern Holland. “The housing market is so turbulent that it is no longer possible for ordinary people with little savings to find a home. Jubelton is a very nice tool to give kids a boost.”

But the scheme is in the process of changing. After all, not every young person knows about generous benefactors while first-time buyers in the housing market have seen housing prices rise due to the arrival of a privileged group of people under the age of 40 with greater purchasing power. For this reason, the maximum exempted donation amount will be reduced to 27,231 euros next year.

More donations

Tax attorney Pam Koopman expects this to lead to a sharp increase in the number of donations this year. “It will no longer be as favorable as the arrangement is now. If people are thinking of donating money to their children, they will have to do so this year if they still wish to take advantage of the generous exemption.”

The main concern, then, is that the big donation is still in order in 2022 – and the money doesn’t have to be used this year. For example, there are three years to buy or renovate a home or to pay off a mortgage. The chart also has the option to split the donation into three. This makes it an option this year, for example, to transfer about 35,000 euros and then a similar amount again in 2023 and 2024.

Many donors give well below the cap: the average ‘Jobleton gift’ in recent years has been €66,000.

Although the most favorable arrangement has disappeared, chances are still that he will be granted tax exemption. In this way it remains possible to give €27,231 at once. Compared to jubelton, this looks like a small beer, but the difference in practice is much less. Many donors already give well below the cap: the average “Jobleton gift” in recent years has been €66,000.

In addition, there will continue to be an annual exemption of €5,677 for a gift from a parent to a child. In 2022, this amount will be 1,000 euros less than last year – due to the Corona crisis, the exemption has been temporarily increased. If you use this scheme a number of years in a row and combine it with the one-time exemption, you will still be up to €66,000 in seven years.

Also read this opinion article: Rutte IV cabinet increases housing problems

building loan

With the construction of the loan, it is also possible to transfer a large amount at once and to help buy a house. From a tax point of view, this is also more convenient than the jubelton. The recipient will then receive the mortgage interest deduction.

The interest could be 4 to 4.5 percent, says financial planner Pludges. This is much higher than what is currently common in the bank. As a result, the interest deduction on such a family loan is much higher. “Kids pay the interest to their parents. They give back some of it. This also gives the parents some return on their savings.” The amount of the interest deduction can be equal to the amount that children pay to parents. For example, a child loan costs nothing in the balance.

This financially appropriate construction has a drawback. Banks can reduce the maximum mortgage loan if the home buyer has other debts. Some banks also do this with a parent loan. This means that children cannot go to every bank. That is why it is important not only to choose a bank to cooperate, but also to correctly record loan agreements between parents and children. It should be clear that the child does not actually have additional costs.

Bloedjes believes that building a loan is often a better option than a donation. This is especially true if there are more children. “I saved people from just donating 80,000 euros. Other children can also request a donation later. On the other hand, if you lend money, all the children will have a claim when the parents die.” Every child has an equal advantage.

Although Jubelton and the housing donation attract a lot of attention, more money is spent in “ordinary” tax-deductible donations. Of the 4.1 billion euros donated with an exemption in 2019 – the latest year for which Statistics Netherlands have figures – 78 per cent fell under the usual donation scheme.

Donation Plan

Parents and children who have a lot of capital to transfer can set up what is called a gift plan. The goal is to obtain children’s capital at a favorable tax rate. This plan begins by looking at the assets — savings, investments, and home value — and the life expectancy of the donor. Then it can be calculated what the donor needs at least annually to support himself.

Attorney Koopman thinks the gift plan is really exciting for a parent with assets of over €120,000 per child. Up to that amount, the parent-child rate of the inheritance tax is 10 percent, up from 20 percent. In short, the goal of the plan is to give as much as possible during your lifetime with a maximum of 10 percent, so that the least possible amount of assets in the inheritance falls to 20 percent.”

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