The 2020 annual tax return is almost upon us and it's time to see if you'll get a tax refund or have to pay a residual tax. If you want to avoid having to get money out of your pocket, here are 4 things you can't miss this year.
2020 has been a very unusual year with Corona shutdown, homework etc. So there are several deductions to pay special attention to this particular time.
This article will go through the 4 main ones and finally look at what deductions you can get yourself:
For many of the 1.4 million Danes who use the driving deduction, SKAT usually calculates it automatically based on your place of residence and your employer's address. But in 2020, nothing is as it used to be.
During the first lockdown, as many as 40% of the population worked at home, and therefore driving to and from work has been very different from before. So SKAT has chosen to turn off the automatic calculation on the annual statement for 2020. Therefore, up to 1.4 mil. Danes must now find their own way around the deduction, because most have still driven some e.g. before the lockdown on 12 March.
So what do you do now? There are basically 3 options:
You try yourself out. Then you need to know the driving rates, whether you live in an outlying municipality and whether there are other circumstances that could increase your deduction
SKAT says they will come up with a new solution, but we don't know much about it yet
You can use online tools such as TaxHelper to calculate and report your deductions
The big uncertainty is the number of days, because you can only get the deduction for the actual days you are away at work. Remember you can also get the deduction if you cycle or take public transport.
More than ever before, people are adapting to working from home. And many have set up dedicated study rooms, but can you actually get a deduction for that on your 2020 tax return?
The short answer is "possibly", but unfortunately SKAT has several strict criteria to be aware of such as:
First of all, it must be a permanent fixture. That is, if you have only set it up for a few months with Corona shutdown, then it is not sufficient
Second, the room must be designed so that it CANNOT be used privately. So it doesn't really matter if you use it privately, because it can't be used privately
In addition, it is also required that you actually spend a substantial part of your working time in the room within normal working hours. Here 1-2 hours a day is not enough, as approved examples are at least 4-6 hours a day
Let's look at an approved example from SKAT to put the above requirements into perspective. A citizen had furnished a room specifically for practicing and recording music. At the same time, he had equipped it with many large musical instruments and soundproofed the entire room. Therefore, it was considered by SKAT to be exclusively suitable for the practice of music, and the deduction was granted.
If you are entitled to a deduction, it can be calculated as a proportion of the cost of your home, such as electricity, heating, rent, property tax and associated equipment. The proportion is calculated based on the size of the room in relation to the whole dwelling, so if your room is 16 sqm. out of a dwelling of 100 sq m, you get 16% of the expenses as a deduction.
While Danes worked at home, many grew tired of their apartments and homes, so a whopping 107,000 homes were bought and sold, which is 22% more than 2019. At the same time, sales of holiday homes also picked up over the summer, as people were unable to go on major trips abroad.
When buying and selling a home, there are several possible deductions that are not automatically reported to SKAT. This means that you have to declare them yourself on your annual tax return. These include:
Guarantee fee: A guarantee fee is a type of fee that a bank charges, for example, when a mortgage is rescheduled. This is because, while the new loan is being registered with the State, the bank provides a guarantee for the loan
Differential interest: when you convert/redeem a loan, the mortgage company can charge you this interest as a kind of compensation for redeeming the loan early
Mortgage guarantee: mortgage guarantee is a kind of insurance you can take out to protect yourself against not being able to pay back your loan on time
Home loan guarantee: the guarantee protects you and your family in case one of you passes away or becomes disabled. It then covers the balance of the loan for the deceased/disabled person.
Interest on the reimbursement statement: in some cases, the buyer can take over the seller's loan and must therefore enter on the reimbursement statement the interest paid by the seller on behalf of the buyer
Here it is important to have documentation for the fees, for example through your loan documents. You can see an example of the loan documents in this article.
If your entrepreneurial dreams or family legacy didn't make it through the Corona crisis in one piece, there may be a small band-aid in the form of a deduction on your 2020 annual return.
The deduction is relevant for those who have started or owned shares/units in a company which has been closed or sold on at a loss. This can add up to quite large amounts, with one citizen, for example, receiving a deduction of DKK 1 750 000 for his losses when his company had to close.
There are basically two different scenarios in which you can get the deduction. The first is if you have started a business yourself or with others and then had to close it down again later. In addition to Corona closures, in the last few years there has been a wave of people with IVS companies, many of which have now had to close because IVSs are not allowed from the end of 2021.
The second scenario is if you have bought into a company and later sold your shares/units on at a lower price than what you bought them for. In doing so, you have made a loss on your shares and you can get a deduction for that.
For both scenarios, it is just important that this does not concern listed companies, as losses are typically reported automatically by the stock exchange. In addition, the loss must be final, i.e. it must have been reported to the Danish Business Authority.
The deduction itself is the money you have lost. That is, if you start a company by investing DKK 40,000 and it goes bankrupt, you get a deduction of DKK 40,000. You can potentially get a bigger deduction if you have injected money into the company subsequently too.
In TaxHelper, we help you find the deductions you're entitled to. You answer a few simple questions that take just 15 minutes to complete.
Then we report the deductions, and you get an extra DKK 2,704 back in tax. At the same time, you only pay if you get a tax saving.
If you have bought or sold a home, there are several deductions to be aware of.
The driving deduction is one of the most used deductions, but also the one we see most miss.