Middeling (Tax Averaging)
Definition
A tax relief scheme allowing individuals with fluctuating incomes to average earnings over three years.
Key Takeaways
- Middeling averages Box 1 income over three consecutive years for tax relief.
- Helps individuals with fluctuating income (bonuses, unemployment) avoid excessive tax.
- Must apply to Belastingdienst with three finalized tax returns; refund if average yields lower tax.
- Particularly beneficial for freelancers and contractors with irregular earnings.
Detailed Explanation
Middeling (tax averaging) is a Dutch tax relief scheme that allows individuals with highly fluctuating Box 1 income to average their earnings over three consecutive years. If the tax calculated on the average is lower than what you actually paid, you receive a refund. This helps people who experienced income spikes (bonuses, freelance windfalls) or drops (unemployment, reduced hours) avoid paying excessive tax due to progressive bracket rates.
To qualify for middeling, you must have three consecutive years of finalized tax returns in the Netherlands, and your income must have fluctuated significantly. You apply for middeling by requesting the Belastingdienst to recalculate your tax using the three-year average. If approved, you may receive a substantial refund. The scheme is particularly beneficial for freelancers, contractors, and those with irregular employment. Note: there are plans to phase out or reform middeling in future years.