If you rent out your vacation home or holiday home, you should be aware of the tax obligations that come with it. Depending on the type of deduction you choose, you will only have to pay tax on the part of your rental income that exceeds a certain limit. It's important to note that there are different rules for renting out a vacation home that you also use yourself. If you use your vacation home exclusively for rental purposes, different rules apply.
You need to make a choice between using a basic deduction or an accounting method. It is not possible to use both at the same time.
The most common way to calculate taxable income when renting out your property is by applying the 40% rule. This method is popular as it's simple and easy to understand.
If you choose this method, you can receive up to DKK 44,500 in rental income tax-free. In addition, you can also deduct an additional 40% from the remaining rental income (which includes both rent and payments from tenants for electricity, oil, telephone, etc.) in addition to the basic deduction of DKK 44,500.
The portion of your rental income that remains after deducting the basic deduction and an additional 40% is taxed as capital income.
A more complex, but also more profitable method when you rent out your holiday home on a larger scale is the accounting deduction.
Using this method, you'll need to account for both income and expenses, but you won't receive the basic deduction of DKK 44,500 or the 40% deduction that you get when using the 40% rule. Instead, you'll have to pay tax on your rental income minus the expenses you incur in connection with the rental of your holiday home, such as maintenance, depreciation of inventory and payment of electricity, water, light and heating.
The expenses that are deductible are deducted from your rental income and the amount left over from the rental income is taxed as capital income.
At BUUS JENSEN, we are ready to help you if you need assistance. You can get in touch with us either by calling us on 3929 0800 or by sending us an email at buusjensen@buusjensen.dk.