Everyone in Denmark who is employed and pays AM (labor market contribution) automatically receives the employment deduction, regardless of whether they are employed in the public or private sector or are self-employed (with profits). Unfortunately, you cannot benefit from the deduction if you are on transfer income or are a student with no income other than SU.
The deduction was introduced in 2004 as a financial incentive to get more people in Denmark off welfare and into work, and has been in place ever since, with rates changing from year to year.
The deduction is automatically calculated annually by SKAT on the basis of your tax return, so you don't have to do anything other than work to get the deduction.
The rate for 2023 is 10.65% of your income with a ceiling of € 45,600. You will get the maximum deduction if you earn at least € 35,680 per month or € 428,169 per year.
When you fill in your tax return and are unsure what your income will be for the year, you need to be extra careful not to set it too high. As the employment deduction increases in line with your income, you may end up with too high a deduction, which you will have to repay at the end of the year.
If, on the other hand, you set your salary income a little lower than expected, you can be sure that you won't get a tax cut. You also never miss out on your employment deduction, but instead get it back in tax in the spring when your annual tax return is generated.
However, this does not apply if you pay top rate tax, as in this situation you may pay too little tax during the year.
Generally, it is your salary income that determines the amount of your deduction, but there are also other types of income that count towards your employment deduction, such as
As long as you pay AM contribution on the additional income, it will affect your employment deduction.
If you are a single parent, you get an extra employment deduction of 6.25%, also known as an extra child benefit, where you can get a maximum extra deduction of DKK 24,400 under the same condition that you are in work. The deduction will also be automatically registered with SKAT if you have been granted extra child benefit by Udbetaling Danmark.
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.
Here are 5 of the deductions most Danes forget on their annual tax return for 2022.
If you have bought or sold a home, there are several deductions to be aware of.