In the Netherlands, when it comes to loonheffingskorting (wage tax deduction), the general recommendation is to have it "aan" (on). This means you are claiming the tax deduction on your salary, resulting in:
- Lower monthly tax withholding: Your employer withholds less tax from your gross salary, meaning you receive a higher net salary (take-home pay) each month.
However, there might be situations where you might consider turning loonheffingskorting "uit" (off). This could be the case if:
- You have multiple jobs: If you claim the deduction from both employers, you might end up receiving too much deduction throughout the year, leading to a potential tax payment at the end of the year. In this case, you should only claim it from one employer.
- You expect a large tax return: If you anticipate receiving a significant tax return at the end of the year, having the deduction "off" can increase your monthly income throughout the year.
It's important to understand that turning off the deduction doesn't mean you avoid paying taxes. You will still be responsible for paying the full amount owed at the end of the year through your tax return.
Ultimately, the decision of whether to have loonheffingskorting "aan" or "uit" depends on your individual circumstances. It's recommended to:
Remember, having the deduction "aan" is generally the recommended approach, as it allows you to spread your tax payments throughout the year and receive a higher monthly net income. However, specific situations might warrant turning it off for strategic tax planning.
