You must pay tax on any rental income you receive from renting out property you live in for part of the year, or from renting out one or more rooms.

You can choose between a standard deduction and an accounting deduction. You only have to pay tax on rental income that exceeds the standard deduction.

In 2018, new rules were adopted by which you get a higher standard deduction if you rent out your property through an agency than if you handle it yourself. However, using an agency will only be a condition from 2021 as this is when it will be possible for the agency to report the income for you. The existing rules on calculating the standard deduction still apply. This means that it is possible to choose between two different sets of rules in 2018-2020. This is explained in more detail below.

The rules apply regardless of whether you rent out through an agency, and also apply to Bed & Breakfast arrangements and Airbnb. If you engage in home swapping, you must pay tax on the value of the property where you are staying.

If you rent out a room for less than 30 days, you may also need to pay VAT. If the tenant pays for other services, such as meals and bed linen, you must pay tax on the profit you make from providing these services.

Enter your rental income in your tax assessment notice

Enter your rental income in your preliminary income assessment

In 2018, new rules were introduced for renting out a room or your property for a period of time. The new rules apply regardless of whether you are a property owner, housing cooperative owner or tenant of a property.

With the new rules, you have a fixed standard deduction and you will be taxed 60% on the rental income that exceeds the standard deduction. From 2021, to get a higher standard deduction, it is a condition that you rent out through an agency that reports your rental income to us.

In 2018, 2019 and 2020, it is possible to choose between the new and the existing rules for property rental. You can read more about the differences and conditions of the two sets of rules in the section below ‘Choose between two standard deductions when you rent out property’.

Calculating your rental income with the new rules

In 2020, the standard deduction is DKK 29,300 (DKK 28,600 in 2019). You will be taxed on 60% of the rental income that exceeds the standard deduction.

  • You deduct the standard deduction from the rental income before paying tax.
  • You then deduct 40% of the amount exceeding the standard deduction.
  • The rental income is the combined rental income, including payment for electricity, water, heating, internet, etc.
  • You are not entitled to deduct expenses (for example expenses for electricity, water and heating).

The income is income from capital. You must enter your income less the standard deduction and reduced by 40% in box 37 of your tax assessment notice and in field 218 of your preliminary income assessment.

You are not entitled to deduct land tax (property tax) and your property value tax will not be reduced.

Example: Renting out a room in your property (new rules)

Eric rents out a room in his property. He applies the new rules and the standard deduction of DKK 28,000 (2018). He has had an annual rental income of DKK 36,000 and has charged an additional DKK 3,000 for electricity, heating and water. The calculation looks like this:

Annual rental income DKK 36,000
Payment received for electricity, water and heating + DKK 3,000
Total income = DKK 39,000
Standard deduction - DKK 28,000
Amount left after standard deduction = DKK 11,000
40% reduction (of amount left after standard deduction) - DKK 4,400
Amount left after standard deduction, less 40% = DKK 6,600

As a result, Eric needs to enter DKK 6,600 in box 37 of his tax assessment notice and in field 218 of his preliminary income assessment.

Example: Renting out your entire property for part of the year (new rules)

Maria rents out her house for two months. She applies the new rules and the standard deduction of DKK 28,000 (2018). She has had an annual rental income of DKK 30,000 and has charged an additional DKK 3,600 for electricity, heating and water. The calculation looks like this:

Ånnual rental income DKK 30,000
Payment received for electricity, water and heating + DKK 3,600
Total income = DKK 33,600
Standard deduction - DKK 28,000
Amount left after standard deduction = DKK 5,600
40% reduction (of amount left after standard deduction) - DKK 2,240
Amount left after standard deduction, less 40% = DKK 3,360

As a result, Maria needs to enter DKK 3,360 in box 37 of her tax assessment notice and in field 218 of her preliminary income assessment.

Room rental or rental of all-year residence for part of the year (read more in Danish in our legal guide)

Applying the standard deduction according to the existing rules depends on whether you own the property or whether you are a housing cooperative member or tenant.

Standard deduction - owner

The standard deduction is 1.33% of your property value, however at least DKK 24,000. You can see your property value in your tax assessment notice. You will only be taxed on the rental income that exceeds the standard deduction.

  • The rental income is the combined rental income, including payment for electricity, water, heating and internet.
  • You are not entitled to deduct expenses (for example expenses for electricity, water and heating).
  • You are not entitled to a deduction in your land tax (property tax) and your property value tax will not be reduced.

If you have only owned the property for part of the year, you need to multiply the annual standard deduction with the number of days you have owned the property and then divide by 365.

The income is income from capital. You should therefore enter your income less the standard deduction in box 37 of your tax assessment notice and in box 218 of your preliminary income assessment.

Example: Renting out a room for the entire year (existing rules)

John rents out a room in his property. In his tax assessment notice he can see that the property value is DKK 1,500,000. The standard deduction is 1.33% of the property value = DKK 1,500,000x1.33/100= DKK 19,950. As the minimum standard deduction is DKK 24,000, the deduction in this case is DKK 24,000.

Annual rental income DKK 36,000
Payment received for electricity, water and heating + DKK 3,000
Total income = DKK 39,000
Standard deduction - DKK 24,000
Taxable income = DKK 15,000

As a result, John needs to enter DKK 15,000 in box 37 of his tax assessment notice and in field 218 of his preliminary income assessment.

Example: Renting out the entire property for part of the year (existing rules)

Molly rents out her house for two months. In her tax assessment notice she can see that the property value is DKK 2,300,000. The standard deduction is 1.33% of the property value = DKK 2,300,000x1.33/100= DKK 30,590.

Rental income for two months DKK 30,000
Amount received for electricity, water and heating + DKK 3,600
Total income = DKK 33,600
Standard deduction - DKK 30,590
Taxable income = DKK 3,010

As a result, Molly needs to enter DKK 3,010 in box 37 of her tax assessment notice and in field 218 of her preliminary income assessment.

Standard deduction - tenant or housing cooperative member

The standard deduction for tenants or housing cooperative members is 2/3 of your total annual rent. You will only be taxed on the part of the rental income that exceeds the standard deduction.

  • Rental income is the total rental income, including payments for electricity, gas, heating, water and telephone.
  • If you pay for heating on account (aconto) as part of your rent, you must deduct the on-account payments before calculating the standard deduction as on-account payments for heating are not included in the calculation of your standard deduction.
  • Any housing benefit you receive cannot be deducted from your rent.
  • As a member of housing cooperative, you cannot include expenses associated with your own loans.
  • You are not entitled to deduct expenses (e.g. for electricity, water and heating).

If you have only owned the property for part of the year, you need to multiply the annual standard deduction with the number of days you have had the property and then divide by 365.

The income is personal income. You should therefore enter your income less the standard deduction in box 20 of your tax assessment notice and in field 250 of your preliminary income assessment.

Example: You are a tenant or housing cooperative member and rent out your home for part of the year (existing rules)

Hannah’s rent is DKK 45,000 a year. As a result, her standard deduction is DKK 30,000. (2/3 of the total annual rent). She rents out her property for part of the year.

Rental income DKK 35,000
Amount received for electricity, water and heating + DKK 3,600
Total income = DKK 38,600
Standard deduction - DKK 30,000
Taxable income = DKK 8,600

Hannah must enter DKK 8,600 in her tax assessment notice, box 20, and in her preliminary income assessment, field 250.

Renting out rooms or renting out all-year residence for part of the year (read more in Danish in our legal guide)

In 2018, 2019 and 2020, you can choose between two different sets of rules when you rent out a room or your property:

New rules as of 2018Existing rules
In 2020, the standard deduction is DKK 29,300 (DKK 28,600 in 2019). If you own your own property, you are entitled to a standard deduction corresponding to 1.33% of your property value, however, no less than DKK 24,000. Any income exceeding the standard deduction is considered income from capital.
You are taxed on 60% of any income exceeding the standard deduction. The standard deduction for tenants or housing cooperative members is 2/3 of your annual rent. Any income exceeding the standard deduction is considered personal income.
The income is income from capital. These rules only apply from 2021 if you rent out your property or room to the same person for a consecutive period of at least 4 months.
You must be the owner, housing cooperative member or tenant of any room or property you rent out.  
To get a higher standard deduction, it is a condition from 2021 that you rent out through an agency, such as Airbnb, that reports your rental income to us. This is not a condition from 2018-2020, however. If you do not rent out through an agency from 2021, you will get a lower standard deduction of around DKK 11,000 (2018 level) per year.  

The size of your rent, public property assessment and rental income determines whether it would pay off for you to use the new rules opposed to the existing ones. See calculation examples under the sections Standard deduction - new rules and Standard deduction - existing rules.

Whether you can apply the standard deduction according to the existing rules depends on whether you own the property or whether you are a housing cooperative member or tenant. Please note that if you use the accounting deduction method, you cannot revert to the standard deduction.

Accounting deduction for owners

If you choose to make use of the accounting deduction, you will be taxed on your rental income minus the actual expenses.

The income is considered income from capital. You must enter your income less your expenses in your tax assessment notice, box 37, and in your preliminary income assessment, field 218.

You should keep a record of rental income and expenses which you must present to us upon request. You must keep the receipts for items you are deducting.

Expenses:

  • Electricity, water, heating, for example.
  • Maintenance costs and write-off of fittings and furniture (except domestic appliances).
  • You cannot deduct expenses for maintenance of the property.

Property value tax relief

You are liable to pay property value tax on the part of the property you rent out. You obtain the relief by entering the rental period and how much of the property you rent out in your tax assessment notice.

Land tax deduction (property tax for your local municipality)

You are entitled to deduct a proportionate part of your land tax as an expense if you rent out at least 10% of your property.

  • If, for instance, you rent out 15%, you deduct 15% of your land tax in the relevant period.

Example - owner (accounting deduction)

Rental income DKK 18,000
Amount received for electricity, water and heating + DKK 3,000
Total income = DKK 21,000
Proportionate deduction of land tax - DKK 6,000
Proportionate deduction of electricity, heating and water - DKK 3,000
Taxable income = DKK 12,000

You should enter DKK 12,000 in box 37 of your tax assessment notice and in field 218 of your preliminary income assessment. You also need to write how much of your property you rent out and for how long.

Your total deductions cannot exceed your rental income.

Accounting deduction for tenants or housing co-op members

If you make use of the accounting deduction, you will be taxed on your rental income minus the actual expenses.

In 2018, 2019 and 2020, it is optional whether you choose to have your income taxed as personal or capital income. You must therefore enter your income less your expenses in your tax assessment notice and in your preliminary income assessment in one of the following ways:

  • As personal income: In box 20 of your tax assessment notice and in field 250 of your preliminary income assessment.
  • As income from capital: In box 37 of your tax assessment notice and in field 218 of your preliminary income assessment.

You should keep a record of rental income and expenses which you must present to us upon request. You must keep the receipts for items you are deducting.

Expenses:

  • Such as electricity, water and heating.
  • Maintenance costs and write-off of fittings and furniture (except domestic appliances).
  • You cannot deduct expenses for maintenance of the property.

Example - tenant or housing cooperative member (accounting deduction)

Stephen’s monthly rent is DKK 5,000, and he rents out 10% of his rental accommodation for three months.

This results in the following rent: 3 months x DKK 5,000 x 10 per cent = DKK 1,500. 

During the same period, he pays DKK 1,500 for electricity, water and heating:

The cost is: 3 months x DKK 1,500 x 10 per cent = DKK 450.

Rental income DKK 4,500
Amount received for electricity, water and heating + DKK 500
Total income = DKK 5,000
Proportionate deduction of rent - DKK 1,500
Proportionate deduction of electricity, heating and water - DKK 450
Taxable income = DKK 3,050

As a result, Stephen needs to enter DKK 3,050 in box 20 of his tax assessment notice, and in field 250 (personal income) of his preliminary income assessment. Alternatively, box 37 or his tax assessment notice and field 218 (income from capital) of his preliminary income assessment.

The total deduction amount cannot exceed the rental income.

Room rental or rental of all-year residence for part of the year (read more in Danish in our legal guide)

If you rent out a room for less than 30 days at a time, you must pay VAT on any income in excess of DKK 50,000 within a period of 12 months. This applies to room rental in owner-occupied homes, housing cooperatives and rented accommodation, but it does not apply to renting out entire properties.

If you know from the first time you rent out accommodation that your income will exceed DKK 50,000, you must register for VAT and pay VAT from the beginning.

If you are registered for VAT for short-term room rental, you must enter the rental income exclusive of VAT, less the standard deduction or any expenses, in your tax assessment notice.

You register for VAT at www.indberet.virk.dk (Danish only)

Read more about VAT liability in Danish in our legal guide

If you rent out your property for a period of more than 12 months, different taxation rules apply:

Renting out property you do not live in