Rental income
Do you have income from renting out your property? Then it counts towards your taxable income and must always be declared. If you rent out privately and on a long-term basis, it is simple to declare the income and you may even qualify for a tax deduction. If you rent out to a business or on a short-term basis, you must submit your accounts with your tax return. Read more about these two rental options below.
You must submit your accounts if your property is rented out in the following connections:
- If your property is rented out to a company. This includes Airbnb.
- If your property is rented out to private people for a short term. A short term is understood as a period of less than three months. It also counts as short-term if the landlord does not live on the property, for example, if the rental property is the landlord's weekend place and it is not registered as the landlord's place of residence.
If your property is rented out to private people on a long term basis, you can choose if you want to declare the income by submitting your accounts or as a part of your gross income.
When you declare your rental income by submitting the accounts, it will be taxed as regular income and can affect your tax rate.
| Example of declaring your rental income by submitting accounts | |||
| Annual rental income | DKK 60,000 | ||
| Deductions | |||
| Fire insurance | DKK - 1,500 | ||
| Heating maintenance | DKK - 500 | ||
| Electricity and oil | DKK - 10,000 | ||
| Interests (no interest subsidy) | DKK - 20,000 | ||
| Taxable amount | DKK 28,000 | ||
When only a part of the house is rented
The example above shows the deductible expenses for a whole house. If only a part of the house is for rent for a certain period, this has to be taken into account. For example, if the house is 200 square meters, and 50 sq m are for rent for 150 days a year, the deductible expenses must be reduced accordingly, i.e. 50/200 sq m and 150/365 days.
Deductible maintenance costs before taxes
This refers to wear and tear by the tenant. To calculate this, the estimated life expectancy of the product must be considered. For example, a washing machine has a life expectancy of 15 years. If it is repaired for wear, you can deduct 1/15th of the maintenance expenses for every year the washing machine has been a part of the rental agreement.
Expenses related to preparing a house or a flat for being rented cannot be deducted.
How to declare rental income by submitting accounts
To declare your rental income, you must complete TAKS' accounting template for rental income, which should be submitted through Borgaragluggin together with your tax return.
Log in on borgaragluggin.fo, go to Tax Return > Complete tax return > B-income. Enter the amounts into field 230 or 330 depending on whether you had a profit or a loss. Attach the accounting template for rental income, and submit.
You may declare your rental income as a part of your gross income if you rent out directly to private people for three months or more. Furthermore, the landlord must also reside on the property. If you decide to declare the rental income as a part of your gross income, it is binding for three years.
When the rental income is declared as a part of your gross income, you get a tax-free deduction every year. The rest is then taxed at a rate of 25%. If the annual rental income is less than the deduction, you don't pay any taxes.
Annual tax-free deduction for 2018-2026 (DKK) | ||||||||
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 |
50,000 | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | 50,000 |
| Example of declaring your rental income as part of your gross income | |||
| Annual rental income | DKK 110,000 | ||
| Deductions | |||
| Tax-free deduction | DKK - 100,000 | ||
| Taxable amount | DKK 10,000 | ||
| Tax rate 25% | DKK 2,500 | ||
When there are several owners
When a rental property has several owners, they divide the tax-free amount among themselves according to possession. If Hanus and Jógvan own half of a rented house each in 2022, they get a tax-free amount of DKK 50,000 each. If Hanus owns more, his tax-free amount increases accordingly. If Hanus rents his half out to a company and must submit his accounts, Jógvan can still declare his half as gross income, because the tax-free amount is always connected to his share of the house.
When one person owns several properties
When one person has several rental agreements, say, in 2023, the tax-free amount is still DKK 100,000. If you declare rental income as gross income, you are bound to also declare the rental income from all of your property rentals in this way.
How to declare your rental income as a part of your gross income
It is simple to declare your rental income as a part of your gross income on TAKS' self-service portal, Borgaragluggin. Log in on borgaragluggin.fo, select Tax Return > Rental income > Declare rental income, complete the fields, add the appropriate tax-free deduction and submit.
If you prefer to declare your rental income by post, you must download the Tax Return, complete the field "Gross rental income" and return it to TAKS, Postboks 2151, 110 Tórshavn.
If you are not sure which of the two options apply to you, or if you want to know more about rental income, call our customer service on tel. 35 26 00 Monday to Thursday from 10 am to 3 pm, or e-mail taks@taks.fo. We are happy to help.