Box 1 Income Tax (Netherlands)
$$\text{Box 1 tax} = \text{Gross tax by bracket} - \text{Heffingskortingen}$$
What is Box 1 Income Tax (Netherlands)?
Box 1 is the Dutch income tax category for income from employment and home ownership (work and home - werk en woning). It covers wages, freelance income, business profit, and the imputed rental value of an owner-occupied home. Most employees only have Box 1 income.
In 2026 Box 1 has three rate brackets. The first bracket (35.75% up to €38,883) is a combined rate including income tax plus social insurance premiums: AOW state pension (17.90%), ANW survivor benefit (0.10%), and WLZ long-term care (9.65%). Brackets 2 and 3 are pure income tax.
When to use Box 1 Income Tax (Netherlands)
Use Box 1 rates whenever computing the income tax and social insurance burden for a Dutch employee or self-employed person earning wages or business profits. For investment income use Box 3 (wealth tax). For substantial interest in a company (5%+) use Box 2.
Worked examples
| Income bracket (2026) | Rate | Includes social insurance? |
|---|---|---|
| Up to €38,883 | 35.75% | Yes - AOW 17.90% + ANW 0.10% + WLZ 9.65% |
| €38,883 - €78,426 | 37.56% | No - income tax only |
| Above €78,426 | 49.50% | No - income tax only |
Common pitfalls
The first-bracket rate (35.75%) is often misquoted as "just income tax" - it is actually a combined rate including social insurance. AOW recipients do not pay the 17.90% AOW premium, dropping their first bracket rate to 17.85%. Forgetting this distinction leads to overestimating tax for pensioners by nearly 18 percentage points on the first €38,883 of income.
Frequently asked questions
Why is the Dutch first tax bracket rate so high at 35.75%?
The 35.75% rate is a combined rate, not pure income tax. It bundles the income tax rate (8.10%) with three social insurance premiums: AOW state pension (17.90%), ANW survivor benefit (0.10%), and WLZ long-term care (9.65%). AOW recipients do not pay the 17.90% AOW premium, cutting their first-bracket rate to 17.85%.
What is the difference between Box 1, Box 2, and Box 3 in the Netherlands?
Box 1 covers employment and business income (taxed at progressive rates 35.75-49.5%). Box 2 covers income from substantial company interest - dividends and capital gains from a 5%+ stake in a company (26.9% flat in 2026). Box 3 is a wealth tax on savings and investments charged on a deemed return regardless of actual return.