What deductions can you make when renting out a house?

Renting out your house can be a convenient way to generate extra income. To make the most of your finances, it is important to understand which deductions you are allowed to make. In this article, we go through the most relevant deductions when renting out a house.

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"Interest expenses on home loans are deductible even when you rent out your house. Remember to include the interest deduction in your tax return."

When you rent out a house or any other type of private residence, you are entitled to an annual standard deduction of 40,000 SEK from your rental income. This means that the first 40,000 SEK you earn from the rental is tax-free. The deduction applies to each private residence you rent out, which is a major advantage if you own several properties.

In addition to the standard deduction, you can also deduct 20 percent of your rental income. For example, if you rent out your house for 100,000 SEK per year, you may deduct an additional 20,000 SEK. This deduction applies specifically to renting out single-family homes and is intended to cover increased costs such as wear and tear. In other words, it is an extra opportunity to reduce your tax and increase your net income from the rental.

Read also: What applies when renting out a house?

Operating costs include expenses for heating, water, sewage, waste collection and similar. When renting out a house, however, you are not allowed to deduct these actual costs separately. Instead, they are covered by the standard deduction and the 20 percent deduction. It is therefore important to be aware of your operating costs and ensure that the deductions cover these expenses.

If you have made capital improvements to the property, such as renovations or extensions, this can affect the taxation when you sell the house in the future. It is important to save receipts and documentation for these expenses, even though they do not give you a direct deduction during the rental period. Capital improvements include investments that increase the value of your property, such as renovating a bathroom or replacing the roof.

Although you cannot deduct these expenses when renting out, they can reduce your taxes when you sell. When selling your house, the taxable gain is calculated by subtracting the purchase price and documented improvements from the selling price. The more improvements you can prove, the lower your taxable profit will be, so keep all documentation carefully.

Read here: How do i tax the rental of two houses?

Interest expenses on loans for the property are deductible under capital income. You can deduct 30 percent of the interest costs up to 100,000 SEK per year, and 21 percent on amounts above this. This deduction is made in your tax return and is not directly linked to the rental itself, but it still affects how much tax you pay. The interest deduction is a tax benefit provided to make home ownership more affordable.

By deducting part of your interest expenses, you reduce your tax and keep more of your income. It is important to remember that the deduction is calculated on your total interest expenses, not only those associated with the rental. For example, if you have both a mortgage and a personal loan, the interest from both loans will be included when calculating your deduction.