How is rental income taxed?

Renting out a property is a great way to earn extra income, but it is important to understand how the taxation works. The tax rules vary depending on the type of property and the deductions available. In this article, we explain the basics of how rental income is taxed in Sweden and how you can make the most of the available deductions when filing your tax return.

Quote:
"Renting out your home can be profitable, but understanding the tax rules is essential to avoid unexpected costs."

Types of properties subject to tax

All types of rented properties are subject to taxation. This includes houses, apartments, holiday homes and even parts of a home, such as a single room. The rules vary depending on the property type and how the rental is handled.

For example, renting out a condominium may require you to follow the rules set by the housing association, while renting out a villa typically does not involve the same restrictions. The tax rules also differ depending on whether the rental is considered private rental or business activity, which affects how income should be reported.

What counts as taxable rental income?

When you rent out your property, all the income you receive is taxable. This includes the rent itself and any additional payments the tenant makes for things like electricity, broadband or furniture.

If you rent out through an agency or platform, you must declare the full amount paid by the intermediary, including the agency fee. These rules apply whether you rent out the entire home or only part of it. Short-term rentals are also fully covered by these regulations.

How much tax do you pay?

Rental income is taxed as capital income at a flat rate of 30 percent. Before calculating the tax, you may deduct the standard allowance of 40,000 SEK per year and per property. The total deduction can never exceed the actual rental income.

This means that if your deductions exceed the rental income, you cannot use the remaining amount to reduce other taxable income. You also cannot deduct actual costs such as utilities, repairs or renovations beyond the standard deduction and the percentage deduction (for small houses).

By using these deductions, you reduce the taxable amount and lower the tax you need to pay.

Tax-free rental income

In some cases, it is possible to rent out your home without paying any tax at all. If your rental income after deductions does not exceed 40,000 SEK per year, the income becomes tax-free.

This makes renting out a property for shorter periods particularly beneficial. However, the tax exemption does not apply if the rental forms part of a business activity or if the income exceeds the threshold. In those cases, normal tax rules apply.

How rental income affects your income tax

Rental income is taxed separately as capital income and does not directly affect your regular income tax. However, it may have indirect effects. For example, if you already have other capital income such as interest or dividends, your total capital income may increase. 
In some cases, this can lead to additional tax if you pass certain thresholds. It is therefore important to have an overview of your full financial situation to avoid surprises during tax season.

Common mistakes to avoid when declaring rental income

It is easy to make errors when declaring rental income, which can result in unnecessary penalties. By staying organised and following the rules, you can avoid these issues. Here are some common mistakes: