It can be that you have to pay taxes on the income you receive from renting out your residence. Sound complicated? Don’t worry. After having read this guide it will be clear – taxes don’t always have to be something to worry about!
Standard deductions for rent income
A standard deduction for rent income of 40,000 kronor was instituted in 2013 (42 chap. 30§ 2 par. IL). This means you pay taxes for the rent income exceeding 40, 000 kronor (solely the excess), and if your revenue is lower than 40,0000 kronor your rent income will be tax-free! Here are some things that are good to think about:
The standard deduction applies each year and for each residence
You are entitled to multiple deductions if you are renting out multiple properties. For instance, you can rent out both your leisure house and condominium during the same year and get full tax deductions for both. The same things if you rent out two small houses on the same property.
Deduction entitlement is based on ownership
The right to deductions is based on the ownership stake of the landlord. This means if you are a part-owner in a residence with someone else, you can only use a part of the deduction in your declaration. For example, if you own half of the residence with your roommate you can only deduct 20,000 kronor (half of the deduction). This also means that if you own a house equally with another person and you use it X-weeks each, then you will only get to use 50% of the standard deduction if you choose to rent out your weeks. In short, owners cannot choose to freely distribute the deduction amongst themselves.
Exceptions when renting out multiple residences
If you are renting out more than three residences, then the renting can be seen as an act of business. Here the governing rules are a bit different.
Exceptions when renting out to one’s own company
You can only take rational/reasonable deductions for the fees that arise due to the rental when renting out to your or your spouse’s employer or own company (42 chap. 32§ IL). This includes increases in costs for power, water, heat, trash pickups, etc.
You are allowed other deductions in addition to the standard deduction above:
Deductions for your share of the rent
If you are subletting or renting out your apartment and paying a portion of it yourself, then you can take deductions for your share, during the time the residence is being rented out (42 chap. 31§ 2-3 par. IL). This means if you can deduct the rent you’re are paying to your landlord for the apartment that you are subletting. If you are renting out a condominium, then you can deduct the fees you are paying to the condominium association.
Other deductions for villas
You can take a deduction of 20% of the rent when renting out a private property, such as a villa or leisure house (42 chap. 31§ 1st. IL).
What can’t I deduct?
You cannot deduct costs such as repairs, extra insurances, power or cleaning.
What rate is rent income taxed at?
That which remains after all deductions shall be put into the capital gains section of your declaration and be taxed at 30% (65 chap. 7§IL). This means if deductions exceed rent income, your rent income is totally tax-free.
An example: renting out a condominium
Let us say that you rent out your condominium for an entire year. It is worth 2.5 million kronor and has a monthly fee of 3,000 kronor. According to current laws, a reasonable rent for the residence is 11,333 kronor per month (see the guide about setting rents). The taxes are then as follows: Another example: renting out a villa If you are renting out your villa, then the tax laws are a little different. Let us say that the residence is worth 3.5 million kronor and has maintenance costs of 4,000 kronor per month. The maximum rent you can charge is 15,666 kronor per month. The taxes are then as follows:
When should the tax declaration be done?
You declare your rent income – if it exceeds deductions – in the next year’s tax declaration (rents in 2015 are declared in 2016). It can be a good idea to do a preliminary tax calculation in the beginning in order to avoid having to make an additional tax payment. It can be advantageous to save rental contracts, receipts for fees to the condominium association, and other important documents. That way you have grounds for the calculation of rent incomes and deductions, in case Skatteverket asks for them. If you are renting out via Qasa we will of course save all this information so you can easily access it when needed.
How do I declare my taxes?
You declare your rent incomes in your normal income declaration. The easiest way to do this is through Skatteverkets e-service. You can even use the SKV 2199 form to help you calculate the excess income from renting. The form doesn’t need to be turned in to Skatteverket, but save it in case Skatteverket ever has questions about your rent incomes.
Does it feel better? Calculating if you have to pay taxes, and if so, how much you need to pay isn’t harder than elementary math. So, if you want to rent out your apartment, make some tea and sit down by your kitchen table to see what applies for your residence. The experience of renting out is elevated when everything is finished and set in stone, even before your tenant has moved in.