For me it's common to make an extra mortgage repayment on a yearly basis above the monthly payments which are standard. I always do this in May, because in May I normally get my tax return deposited from the Belastingdienst (Dutch tax agency). Also it's common in The Netherlands for companies to pay out a holiday allowance of 8% of the yearly salary to their staff in May.
My tax return is mainly based on the balance between the tax I pay over my assets (savings, share portfolio, bonds, etc) and the tax return I get on mortgage paid. In the Dutch tax system paid mortgage interest can be deducted from paid income tax. Basically it means I get approximately 50% of my paid mortage interest back from the government.
A few years ago this always resulted in a few thousand euro's tax refund, but as a result of my interest percentage decreasing from 4,8% to 1,99% at the end of the fixed interest period I not pay that much interest anymore and the tax return is relatively small compared to a few years ago. In the past I got almost €3.000 as tax return, but this year due to the low interest I pay in combination with tax I have to pay over my assets (vermogensbelasting) I get back €1.000.
The holiday allowance which the company pays out in May to me is approximately €3.000.
The tax return and holidayallowance plus a bit of my savings I use to repay €5.000 extra on my mortgage. This will result in a yearly saving of €360 on future mortgage payments.
This week I bought 250 shares Enbridge Energy Partners at a price of $9,78. The current distribution of Enbridge Energy Partners is $0,35 per quarter. With this purchase I add $350 to my yearly estimated dividend income, but because I'm not exactly 100% sure about the withholding rate and/or if the tax threaty rate with NL is used I deduct the MLP withholding tax rate of 39,6% for now and book in an estimated dividend income of $211,40.
Enbridge Energy Partners is an MLP, a limited partnership that is publicly traded. An MLP combines the tax benefits of a limited partnership with the liquidity of publicly traded securities. To obtain the tax benefits of a pass through, MLPs must generate at least 90% or more of their income from qualifying sources such as from production, processing, storage, and transportation of depletable natural resources and minerals. In addition, real property rents also qualify.
An MLP is not paying federal tax, but as unitholder, Dutch/foreign unitholder, I now expect to fill out some beautiful papers called 1040NR / Schedule K1. Also I have to apply for an Individual Taxpayer Identification Number (ITIN). Reading up about this tax paperwork was challenging, because I really had a hard time finding information usefull for me as Dutch citizen.
This is my first and for now last purchase of an MLP. I will first check next year how things go regarding the tax return and based on my experience with filing for tax return I will decide if it's worth adding more MLP units to my portfolio in the future or if the paperwork is just not worth it and it's better to close this position.