Previously, purchasing a property for a child could offer specific tax advantages, especially if the property was managed under the business tax scheme.
Today, the rules have changed. You can still claim deductions for a wide range of rental expenses, but many of the specific tax benefits have been limited by legislative changes.
What has changed?
The legislative changes were introduced to create greater tax equality between parent-purchased properties and other property purchases.
Previously, some parents could achieve more favorable taxation on items such as interest expenses and capital returns. Those opportunities are now limited, so the taxation is more in line with that of other homeowners.
Can you still claim deductions?
Yes.
A parent-purchased property is still a rental property, and therefore you can continue to claim deductions for many of the expenses necessary to manage the rental.
These include, among others:
- interest expenses and loan fees
- property maintenance
- insurance
- common expenses
- other operating costs related to the rental
Does this mean that a parent-purchased property is no longer worth it?
Not necessarily.
For many families, a parent-purchased property is not just about taxes, but also about helping a child secure stable housing while owning a property that can be sold or taken over later.
Even though the tax benefits have decreased, a parent-purchased property can still be a sensible solution. However, it all depends on your finances, financing, and your specific situation.
How do you claim the deductions you are entitled to?
One of the biggest challenges with a parent-purchase property is not necessarily the rules themselves, but ensuring that all relevant expenses are calculated correctly and reported in the right places.
Reportability is designed for landlords and those who have purchased property for their children, helping you to:
- calculate the tax on your rental income
- identify the deductions you are entitled to
- manage the rules for the various tax schemes
- show how information should be reported to the Danish Tax Agency
