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Five ways to (legally) lower your tax bill in Denmark

Denmark has a reputation for having higher taxes than most other countries. These deduction rules can help you to reduce your annual bill.

Five ways to (legally) lower your tax bill in Denmark
Window cleaning is one of a number of domestic services that could get you money off your Danish tax bill. Photo: Liselotte Sabroe/Ritzau Scanpix

Denmark has a reputation for high taxes, not least due to the fact that the OECD (Organisation for Economic Co-operation and Development) has listed Denmark as the highest tax country for several years. The most recent OECD report listed Denmark as top, followed by France, Belgium, Italy and Sweden.

Some economists disagree with the way tax is assessed in these world rankings, which they say makes Denmark’s tax system appear more extreme than it is, but the fact that Denmark has a relatively high tax burden is not disputed.

READ ALSO: Does Denmark really have the highest tax in the world?

High tax fits with the country’s long-established model providing a high social security net, but this does not mean the country’s tax system is inflexible. There are a number of deduction rules to be aware of if you want to ensure you’re not paying more than you need to.

Self-employed and employed people alike can adjust their tax returns by logging in to the website and entering the deductions on their forskudsopgørelse (preliminary tax return, available from November of the current tax year) or årsopgørelse (annual return for the previous year, calculated and displayed on the SKAT website at the beginning of March). 

READ ALSO: How you can access (and edit) your 2024 Danish tax return in English

Commuter deduction (kørselsfradrag) 

If you travel a long distance to get to and from work, you may be entitled to deduct some of your commuting expenses from your taxable income.

The commuter deduction, or kørselsfradrag, is designed to cover the cost of travelling to and from work over a set minimum distance. It applies to rail and car journeys alike.

You can claim the deduction if you travel at total of 24 kilometres to get to and from work (12 kilometres each way, in other words). This only applies on days when you actually travelled from your home to a place of work, and not, for example, for days you spent working from home.

For journeys from 25-120 kilometres, the deduction (for the 2023 tax year) is 2.19 kroner per kilometre. Over 120, kilometres, this rate decreases to 1.10 kroner per kilometre. However, 25 so-called “outer municipalities” as well as rural small islands are exempted from this and retain the higher rate for longer journeys.

You should note that the deduction is not automatically transferred from your preliminary to your annual tax return, so you need to enter it on both.

READ ALSO: EXPLAINED: How does Denmark’s tax deduction for commuting work?

Domestic services (servicefradrag)

After the commuter deduction outlined above, the most common deduction added by Danish taxpayers to their annual statements is the deduction for domestic services.

The service deduction can be given for 26 percent of your expenditure on domestic services such as cleaning, childcare and gardening. As such, if you spend 1,000 kroner on one of these services, you can get 260 kroner off your tax bill.

The allowance for this deduction was increased in the 2024 budget, so that in future years, you will be able to claim the deduction for up to 11,900 kroner of spending on domestic services. In 2023, the limit is 6,600 kroner.

In addition to cleaning, childcare and gardening (including clearing snow from driveways and paths), you can also claim the deduction for window cleaning services at your home.

The childcare must take place at your own property (and not at a municipal or private childcare institution), but you can claim the tax deduction if you pay somebody to drop off and pick up your child from, for example, a kindergarten.

More detail on the service deduction is available on the Danish Tax Agency website.

Business trips (rejsefradrag) 

Another deduction which can be added by individual taxpayers to their returns is the rejsefradrag or “travel deduction”, which can apply for lodging and food expenses on business travel, if these are not paid by your employer.

The rate of the deduction is 26 percent and the maximum amount for which you can be given a deduction is 30,500 for 2023 and 31,600 for 2024. 

Deductions are also granted for so-called “double householding” (dobbelt husførelse) if you have a temporary work place far from your home, which, due to the distance, requires you to take accommodation rather than travel from home each day.

More detail on this deduction is available on the Danish Tax Agency website.

Work clothes, textbooks, courses (and more) 

With a few exceptions, the cost of things that you need to buy to be able to do your job – clothing, textbooks or equipment – can be applied as a tax deduction.

It should be noted that such items must only be bought for work use, so if, for example, you purchase a laptop and use it for both work and personal matters, it won’t be tax deductible.

If you have a home office or workshop, you can deduct costs for the room in a narrow set of circumstances only: the type or extent of the work you do in the room must prevent it from any other (private) home use. A laboratory would qualify, for example, but a desk in the corner of your bedroom won’t.

However, you can apply a deduction to at least 6,700 kroner of your income in 2023 and 7,000 in 2024 if you are eligible for this deduction.

Likewise, clothes and textbooks must be impossible to conduct your work without for them to qualify for deductions. Think uniforms, not suits; and academic journals in your specific field, not National Geographic.

Unemployment insurance and union membership (A-kasse og fagforening) 

If you are member of an unemployment insurance provider (A-kasse) or a trade union – which the majority of people on the Danish labour market are – then you can claim a deduction for your membership fees.

READ ALSO: A-kasse: Everything foreigners in Denmark need to know about unemployment insurance

There are rules for the maximum costs you can claim a deduction for – around 6,000 kroner per year for trade union in 2023 and 7,000 kroner in 2024 for example, which may be a little less than you actually pay.

As with the other deductions listed above, you include these costs in your tax return by logging on to the website of the Danish Tax Authority, SKAT, and entering them in the appropriated boxes on your preliminary or annual return. If you need help with this, SKAT has a telephone helpline which can provide guidance. You can opt for the service in English and the contact details are here.

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Danish government agrees to half krone hike in diesel tax

Denmark's government has struck a deal with four opposition parties to hike tax on diesel from the start of next year, as well as deciding the priorities for 4.9 billion kroner of green spending.

Danish government agrees to half krone hike in diesel tax

The three-party coalition government, which includes the Social Democrats, Liberal and Moderate parties, reached agreement on the tax hike as part of a green spending deal with the Socialist People’s Party, the Conservative People’s Party, the Red Green Alliance and the Social Liberal Party. 

The deal will see tax on diesel increased by half a kroner per litre from the start of 2025, with owners of diesel cars compensated in the first two years by a reduction in the udligningsafgiften or “equalisation tax”, meaning that only those who drive frequently or long distances will see their costs increase. 

“If you drive less than 20,000 kilometers per year, there will be a small cut in your costs. If you drive further, it will be a little more expensive,” Denmark’s climate minister, Lars Aagaard, from the Moderate Party, said at a press conference announcing the deal. “It will become a little but more expensive at the pump. On the other hand, your ongoing payment for having a car will be slightly less in the first few years.” 

The government estimates that hiking the tax on diesel will reduce greenhouse gas emissions by 0.4 million tonnes of CO2 in 2025 and 0.3 million tonnes of CO2 in 2030.

The tax is significantly lower than the 0.9 kroner hike in the diesel tax recommended by the Danish Climate Council, but Aagaard said that this was necessary given the risk that truck drivers might opt to fill up their tanks elsewhere. 

“We have adopted a tax which will lie between those of our two large neighboring countries, Sweden and Germany. It is not put into the world to bother people,” he said.

“We all have to remember that in 2027 it will get a step up because we are implementing the European rules. Those who sell fuel must buy CO2 allowances. The tax system is also dynamic, so we are looking at neighbouring countries.”