For most landlords, the answer is yes.

However, there is an important distinction between a taxable profit and having a significant surplus in your bank account.

Furthermore, the Danish Tax Agency generally expects that a rental property is operated with the intention of generating a profit.

Is a rental property required to be profitable?

Yes.

When you rent out a property, it is generally expected that the rental is conducted on market terms and with the objective of generating a financial profit.

This also applies if you are renting to family, friends, or other close associates.

If the rent is set significantly below market rates, the Danish Tax Agency may, in some cases, base your tax assessment on a higher rental income. This could mean you are taxed on income you never actually received.

What if the property is located in an area with low rents?

In some parts of the country, it can be difficult to achieve an actual profit.

In such situations, the Danish Tax Agency may, in some cases, accept that the rental is managed with the goal of minimizing losses if there is no realistic prospect of achieving a profit.

This always depends on the specific circumstances.

Why does the tax calculation differ from your bank balance?

Many people are surprised to find that their taxable profit is not the same as the money remaining in their account.

This is partly because loan repayments are not tax-deductible.

For example:

• Taxable profit: DKK 70,000
• Loan repayments: DKK 65,000
• Cash surplus: DKK 5,000.

Even if there is only DKK 5,000 left in cash, the repayments have not "disappeared." They reduce your debt and increase the equity in your property, which can strengthen your finances in the long term.

How do you know if your rental property is profitable?

It requires you to calculate:

• annual rental income
• interest expenses
• operating and maintenance costs
• the tax to be paid
• the actual cash flow after loan repayments

Only then will you get an accurate picture of both the tax result and your financial situation.

Get an overview of your rental property finances

Reportability helps landlords calculate the tax on their rental income and provides a clear overview of the year's results.

The tool helps you, among other things, to:

• calculate the taxable profit
• ensure that all relevant deductions are included
• simplify reporting to the Danish Tax Agency
• create an overview of your rental finances

In short

Most rental properties generate a taxable profit, and as a starting point, the Danish Tax Agency expects them to be operated with the intention of making a profit.

At the same time, it is important to distinguish between the taxable profit and the amount remaining in your bank account. Loan repayments reduce your available cash flow, but they also build equity in your property.