Tax rates vs. tax credits

The tax credit is a much-loved tool for practising income politics. With effect from next year senior citizens stand to benefit from an increase in the tax credit for the lower-income elderly. Working members of the population for their part stand to benefit from the delayed phasing out of the employee’s tax credit and the increase in the maximum.

General tax credit

The general tax credit maximum for those who have not yet reached (state) retirement age is being raised slightly from its 2016 level of € 2,242 to € 2,254 next year, compared with € 1,145 this year to € 1,151 in 2017 for those who have reached (state) retirement age. The rate of reduction of the income-dependent general tax credit is set to drop slightly in 2017 compared with 2016.

Lower-income elderly tax credit

The tax credit for the lower-income elderly is set to rise from this year’s level of € 1,187 to € 1,292 next year. The change for the higher-income elderly will be negligible, as will that for elderly singles.

Employee’s tax credit

All in all the adjustments to the employee’s tax credit will result in a greater number of people being entitled to a slightly increased employee’s tax credit in 2017. The tax credit maximum for the employed is to be increased from its current level of € 3,103 to € 3,223 next year whereas the rate of reduction is being slowed down and the income range to which the tax credit applies, extended. The overall effect of this will be set off to a degree by the accelerated start of the employee’s tax credit phase-out, with the tax credit decrease starting at an income level of € 32,444 in 2017 compared with € 34,015 currently.

Tax bracket range

This year’s third (second-highest) payroll and income tax bracket range is capped at € 66,421. This will change in 2017 to € 67,072. The first and second payroll and income tax brackets are set to go up slightly.

Dutch version: Tarieven en heffingskorting