The biggest difference between short-term and long-term rentals is not just how long the property is rented out, but also how the rental income is taxed.
Therefore, it is important to know which type of rental you have before calculating your tax.
What is a long-term rental?
A long-term rental is the rental of a property that you do not live in yourself, where the tenant occupies the property as their permanent residence. Typically, this involves an indefinite lease agreement or a contract valid for one year or longer.
For tax purposes, this type of rental is considered commercial rental. In practical terms, this means your rental activity is treated as a business. However, there is no requirement to register your rental with a CVR number.
As a landlord, you can therefore choose to be taxed under one of the three applicable tax schemes:
- the Personal Tax Act
- the capital return scheme
- the business tax scheme
Which scheme is most advantageous depends on your finances and your rental activity.
What is a short-term rental?
A short-term rental is the rental of a property or a room that you live in yourself. This could be, for example, when you rent out your home over the summer while you are away, or a room to a student for a period of time.
Different tax rules apply here compared to long-term rentals.
In principle, you can choose between:
- the base deduction method, where you only pay tax once the rental income exceeds the applicable base deduction
- the accounting method, where you are taxed on the profit after deducting relevant expenses
Which method is most beneficial depends on your specific situation.
What if you rent out through Airbnb?
If you rent out your property through a platform like Airbnb, your rental income is often automatically reported to the Danish Tax Agency.
Furthermore, short-term rentals via Airbnb offer a larger tax deduction than other methods used to calculate tax on short-term rentals.
Which type of rental is Reportability suitable for?
Reportability is designed for landlords focusing on long-term rentals and helps with, among other things:
- calculating tax
- choosing a tax scheme
- managing deductions
- reporting to the Danish Tax Agency
If you primarily handle short-term rentals, the rules may be simpler, and in many cases, a tool specialized for that type of rental will be a more cost-effective solution.
In short
Short-term and long-term rentals are taxed according to different rules.
For long-term rentals, you are taxed under the rules for commercial rental, while short-term rentals allow you to use either the base deduction method or the accounting method.
Therefore, it is important to clarify which type of rental you have before calculating your tax.
