Tax when renting out holiday homes and vacation rentals

Summer is upon us, and if you're planning to rent out your holiday home or vacation home, remember that rental income is taxable. This applies both to rentals in Denmark and abroad.

Deduction options

There are different deduction options depending on whether you rent privately or through an agency. You can choose between a basic deduction and an accounting deduction. The basic deduction means that you only pay tax on the part of the rental income that exceeds the deduction. The deduction applies per property.

Private rental vs. commercial rental

If you use your vacation home partially privately, there are specific rules for the rental. However, if you only use your vacation home for rental purposes, it is considered a commercial rental and different rules apply. For renting out parts of your private home through platforms like Airbnb, yet another set of rules apply.

EU directive for platform rental

An EU directive that came into force on January 1, 2023, requires digital platform operators to report landlords' personal data to SKAT. This includes your social security number and your residential address. This information helps tax authorities identify platform users and their income.

Rental platforms will also ask for the property's BFE number when renting out vacation homes. Although it is voluntary to provide this information, it is necessary for correct tax reporting.

Rental of foreign vacation rentals

From 2023, reporting of rental of foreign holiday homes must be done without a BFE number, as such properties do not have one. You must calculate the taxable income yourself and enter the amount in box 37 on the annual tax return. You can still apply the basic deduction, although SKAT cannot automatically calculate it.

Basic deduction when renting out

For private rentals, the first DKK 12,700 per holiday home in 2024 (DKK 12,200 in 2023) is tax-free. You must register this deduction with SKAT yourself. If you rent through an agency, the basic deduction is higher: DKK 46,100 per holiday home in 2024 (DKK 44,500 in 2023). The agency must be registered with SKAT. If you handle energy and cleaning costs yourself, these amounts must also be reported.

You pay tax on 60% of the income above the basic deduction, regardless of whether the rental is private or through an agency. It's not possible to combine the basic deduction from both private and agency rentals.

Distribution of rental income and deductions

If the holiday home is owned jointly with others, the rental income and basic deduction are divided between the owners according to ownership. If you only own the property for part of the year, you must declare the taxable portion yourself in box 37/field 218 on the annual tax return.

Accounting deduction

If you choose the accounting deduction, you pay tax on the rental income minus your actual expenses. You must keep accurate records of rental income and expenses and be able to present receipts to SKAT.

Rental income includes payments from tenants for electricity, water and heating. Deductible expenses include electricity, water, heating, advertising costs, maintenance and depreciation of fixtures and fittings (excluding white goods). Expenses for maintenance of the property itself cannot be deducted.

You also get a property tax deduction for the weeks you rent out and you don't have to pay property value tax for the period the holiday home is rented out.

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