Tax deductions when renting out: tax, the standard deduction and expenses explained

Which deduction method suits your rental best? It is important to understand this before you rent out, so you can be sure it is done by the rules and that you get the best financial result.

-> This article explains the standard deduction and the accounting method. We also cover the difference between the two and what we usually recommend to our clients.

If you rent out a home, a room or a flat in Copenhagen, it is not enough to focus on the rent. The key question is what you are actually left with once tax, running costs, empty periods, maintenance and management are taken into account. This is where tax deductions when renting out quickly become one of the most important topics for any landlord.

Many homeowners go wrong from the start. Some think the whole rental income is taxed directly. Others assume that all expenses can automatically be deducted. Both are mistakes. The rules depend on, among other things, how you rent out, how long you rent out for, whether you use an agency or a platform, and whether you choose the standard deduction (bundfradrag) or the accounting method (regnskabsmæssigt fradrag).

This guide gives you an overview of tax deductions when renting out, so you can better judge what makes sense in your situation.

Why deductions matter more than most people think

It is easy to focus only on the gross rent. If a home can be rented out for DKK 18,000 a month, it sounds attractive at first. But gross rent is not the same as net income. When you rent out, you need to think about:

• Tax.
• Deduction method.
• Maintenance.
• Utilities.
• Management.
• Risk of empty periods.
• The legal side.
• Breach of the lease and move-out costs.

That is exactly why it makes sense to see renting out as an operation, not just as “passive extra income”. At BY Administration, that is what we focus on: optimising rental income, reducing hassle and handling the whole process, from lease and screening to deposit and day-to-day operations.

The two main methods: the standard deduction or the accounting method

When you are taxed on rental income, it is essential to understand the difference between the two models. The Danish Tax Agency (Skattestyrelsen) describes them as the two basic tax routes when renting out a home:

1. The standard deduction
2. The accounting method

With the accounting method, the income is taxed after deducting the actual expenses. This is where many landlords unfortunately choose wrongly. Not because the rules are impossible, but because they choose the model that sounds easiest rather than the one that gives the best financial result.

What is the standard deduction when renting out?

In practice, the standard deduction means that part of your rental income is tax-free. That makes the model simple and attractive, especially if you do not have large documented expenses, or if you only rent out to a limited extent.

Legal Desk (in Danish) states that the standard deduction in 2026 is:

• DKK 35,100, if you rent out through an agency or a platform that reports the rental income automatically. That means the first DKK 35,100 you earn from renting out your home is completely tax-free.
• DKK 13,800, if you rent out privately without using a platform (for example without advertising on Airbnb and Booking.com).

  The Danish Tax Agency gives the same levels for renting out for less than 4 months and also points out that you only pay tax on 60% of the part that exceeds the standard deduction.

Example of the standard deduction

Say you rent out your home through a platform or an agency with automatic reporting, and your total rental income for the year is DKK 72,000.

If the standard deduction is DKK 35,100, the excess amount is DKK 36,900. Only 60% of this amount is taxable. Legal Desk shows exactly this example, where DKK 36,900 is reduced by 40%, so the taxable amount becomes DKK 22,140.

This is an important point: you are not taxed on the whole surplus above the standard deduction, only on 60% of it.

It means that if your gross rental income over the year was DKK 72,000, you first get a deduction of DKK 35,100. Of the remaining amount, you also get an extra “deduction” of DKK 14,760, equal to 40% of the amount above the standard deduction, which you also do not pay tax on.

In total, DKK 49,860 of the DKK 72,000 is therefore tax-free, and you only pay tax on the remaining DKK 22,140.

When is the standard deduction the smartest choice?

The standard deduction is often best when:

• You rent out now and then.
• You have limited expenses.
• You want simple administration.
• You do not want to collect and document lots of receipts.
• You rent out through an agency or platform and can get the higher deduction.

It is especially relevant for owners who rent out while travelling, living abroad, at weekends or for shorter periods, where the focus is simple operation and minimal administration.

What is the accounting method?

The accounting method works differently. Here you do not look at a fixed standard deduction, but at the actual expenses you have had in connection with the rental.

Advodan (in Danish) lists, among others, the following types of expenses as relevant examples:

• Electricity, water and heating.
• Maintenance costs and depreciation on furniture and fittings.
• Owners’ association fees.
• Rental adverts.

It is also pointed out that as an owner you can in some cases deduct a proportional share of the land tax (grundskyld) if at least 10% of the home is rented out.

When is the accounting method best?

This model usually makes most sense when:

• You have high running costs.
• You have ongoing maintenance.
• You spend money on advertising, preparing the home or furniture and fittings.
• You want to optimise tax based on your actual costs.
• You run the rental more systematically.

But there is an important drawback: you must be able to document the expenses. You must be able to show a statement and receipts if the Danish Tax Agency asks for them, and the total deduction cannot exceed the rental income.

The mistake many landlords make

A classic mistake is to choose the accounting method without having your receipts in order. Then you lose both the simplicity of the standard deduction and the security of correct documentation. Another important detail is that if you choose the accounting method, you cannot simply switch back afterwards, as if the choice made no difference. Be aware of the consequences of choosing this method if your receipts are not in order.

Deductions for short-term rental

Short-term rental is a core area for BY Administration, which manages homes on Airbnb, Booking.com and Vrbo and works to optimise short-term income.

For short-term rental, the standard deduction model is often attractive, because it is simple and suits owners who do not necessarily want to keep detailed accounts for every booking.

At the same time, there is a VAT threshold to keep an eye on in some cases. Advodan (in Danish) states that if you rent out one or more rooms in your permanent home for less than 30 days per letting, you must be aware of VAT if the income exceeds DKK 50,000 within 12 months.

This is exactly the kind of point many private hosts overlook. And it is also a good reason why professional management is often more than just convenience. It is also about compliance.

Deductions when renting out for 4 to 12 months

If you rent out for a medium-length period, the rules become more interesting. You can choose between two sets of rules for the standard deduction, and the deduction depends on whether you own the home or are a tenant or a co-op owner. For an owner-occupied home, the deduction is 1.33% of the property value, but at least DKK 24,000. For a rented home or a co-op apartment (andelsbolig), the deduction is 2/3 of the total yearly rent or co-op housing charge (boligafgift).

In practice, this means medium-length rental often takes a little more calculation, but also gives the chance of a better tax set-up if the home is structured correctly.

Deductions when subletting

If you rent your home yourself and sublet it, the rules are different. The standard deduction when subletting is two thirds of the yearly rent, and if you only rent out part of the year, you must apportion the deduction according to how many days you have lived in the home yourself.

This matters, because many tenants and co-op owners think they can simply use the same logic as owners. They cannot.

When does renting out become commercial?

This is a point many landlords underestimate.

It counts as commercial rental (in Danish) when you rent out your home for 12 consecutive months or more without living in it yourself. In that situation, the standard deduction no longer applies.

When you rent out an owner-occupied home for at least 12 months without living in it yourself, it is commercial rental, and the favourable standard deduction rules do not apply.

This is an important strategic limit. If you are close to 12 months, you should not just “let the rental carry on” without understanding the consequences. Here it is smarter to think ahead and set up the right model from the start.

Which expenses are typically relevant?

If you use the accounting method, it is the documented running costs that matter. Landlords typically focus on:

• Utilities during the rental period.
• Owners’ association fees.
• Advertising and platform costs.
• Furniture, fittings and wear on contents.
• Minor maintenance.
• Management.

But it is important not to overdo it. You cannot just deduct everything because it “somehow relates to the home”. For example, costs for maintaining the property itself cannot simply be deducted, while a proportional share of the land tax can in some cases.

Why professional management makes financial sense

On paper, using a management company can seem more expensive. In practice, it is often the other way round.

If the rental becomes more stable, empty periods are reduced, pricing is optimised, you get better guests and your tax choices are made correctly, the net result typically rises by more than the cost of management.

BY Administration’s services are built on exactly that: greater stability, screening, a correct lease, handling of the deposit and optimised rental income. For long-term rental we also use data-driven rent setting and a verified network.

The point is this: the right rental model is not just about getting the home rented out, but about getting it rented out correctly.

The best deduction is the one that fits your model

There is no single deduction that is best for everyone. The best choice depends on:

• Whether you own or sublet
• How long you rent out for
• Whether you use a platform, an agency or rent out through your “network”.
• How high your expenses are.
• How much administration you want to handle yourself.

The standard deduction is often best for simple and partial rental. The accounting method can be better if you have higher running costs and your documentation in order. But the most important thing is that you make a conscious choice.

If you want to optimise renting out in Copenhagen, tax and deductions are not just something to “get out of the way”. They are a direct part of your return. Get in touch with us today to hear about your options.