Tax on Rental Income - What Do You Need to Pay?

When you rent out your property, it's important to understand how your rental income is taxed. This guide helps you understand the rules and calculate what you need to pay in taxes from your rental income.

What Is Taxable Rental Income?

Rental income is the money you receive from your tenants. In Denmark, rental income is generally taxable, but you can deduct certain expenses before the tax is calculated.

Two Methods to Calculate Tax on Rental Income

There are two methods for calculating taxes on rental income: the standard allowance method (bundfradrag) and the accounting method (regnskabsmetoden).

The Standard Allowance Method (Bundfradrag)

This method gives you a fixed annual allowance. The allowance varies each year. You can find the current amounts by searching for "bundfradrag lejeindtægt" on the Danish Tax Authority’s website. Any income exceeding this allowance is taxable.

The Accounting Method (Regnskabsmetoden)

With this method, you deduct your actual expenses from your rental income. Such expenses can include maintenance, property taxes, insurance, and administration fees. You pay taxes on the profit remaining after these expenses are deducted.

What Expenses Can You Deduct?

If you choose the accounting method, you can deduct expenses such as:

• Maintenance and repairs
• Property taxes and property insurance
• Administration costs and advertising expenses
• Interest expenses on housing loans

How to Declare Rental Income on Your Tax Return

You must report your rental income on your tax return. Declare the amount under the category "Property Rental," specifying which method you are using.