Understand Deductions

Annual return 2020: 4 things you can’t miss

Annual return 2020

4 things you can't miss on the 2020 annual return

The 2020 annual return is soon upon us, and it's time to see if you get money back in tax or have to pay a residual tax. If you want to avoid having to take 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, working from home, etc. So there are several deductions to pay special attention to just this time.

This article will go through the top 4 and look at what deductions you can get yourself:
  1. The driving deduction is not automatic on the 2020 annual return
  2. Home office under Corona, does that qualify for a deduction?
  3. Over 107.000 homes have been bought/sold in 2020, which might qualify for deductions
  4. Corona has caused bankruptcies, and you can get deductions for that

The driving deduction is not automatic on the 2020 annual return

For many of the 1.4 million Danes who use the driving deduction, SKAT usually calculates it automatically based on your home address and your employer's address. But in 2020, nothing is as usual.

During the first lockdown, as many as 40% of the population worked at home, which is why driving to and from work has been very different from before. So SKAT has chosen to turn off the automatic calculation on the annual return for 2020. Therefore, up to 1,4 mil. Danes must now find their own way around the deduction, because most have still driven something, for example, before lockdown on March 12.

So what do you do now? There are basically 3 options:
  • You try yourself. Then you need to get a handle on driving rates, whether you live in an "outer municipality" and whether there are other circumstances that can increase your deduction
  • SKAT says they'll come up with a new solution, but we don't know much about it yet
  • You can use online tools such as Tax Helper, who helps with calculating and reporting one's deductions

The great uncertainty is the number of days, because you can only get a deduction for the actual days you are off to work. Keep in mind that you can also get deductions if you cycle or take public transport.

Home office under Corona, does that qualify for a deduction?

More than ever before, people have adapted to work from home. And many have also set up actual home offices, but can you get a deduction for it in the 2020 annual return?

The short answer is "possibly", but SKAT unfortunately has several strict criteria to be aware of such as:
  • First of all, it must be a permanent setup. That is, if you have just set it up for a few months during the Corona shutdown, then it is not enough
  • Next, the room must be arranged so that it CAN'T be used privately. It doesn't really matter if you use it privately, because you shouldn't be able to use it privately at all
  • In addition, you are also required to actually spend a significant part of your working time in the room during 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 designed a room specifically to rehearse and record music. He had also equipped it with many large musical instruments and soundproofed the room. Therefore, SKAT considered it to be suitable solely for the exercise of music with which the deduction was granted.

If you are entitled to a deduction, it can be calculated as a proportion of the household expenses such as electricity, heating, rent, property tax and equipment to the room. The proportion is calculated based on the size of the room, so if your room is 16 sqm out of a home of 100 sqm, then you get 16% of the costs in deductions.

Over 107.000 homes have been bought/sold in 2020, which might qualify for deductions

While danes worked at home, many got tired of their apartments and homes, so as many as 107.000 homes have been bought and sold, which is 22% more than in 2019. At the same time, sales of holiday homes also escalated over the summer, as people could not make long trips abroad.

When buying and selling property, there are several possible deductionsthat are not automatically reported to SKAT. In other words, you have to indicate them yourself in your annual return. These include:
  • Guarantee commission (Danish: 'garantiprovision'): Guarantee commission is a form of fee that a bank takes, for example, in connection with a mortgage refinancing. This is due to the bank setting up a gaurantee while the loan is filed with the state (Danish: "tinglyst")
  • Difference interest: When you reschedule/repay a loan, the mortgage institution may charge this interest as a kind of compensation for the early repayment of the loan
  • Mortgage guarantee: Mortgage guarantee is a kind of insurance you can take out to guard yourself against the case where you cannot repay the loan in a timely manner.
  • Mortgage insurance: It protects you and your family, in the case that one of you pass away or becomes incapacitated It that case, it covers the outstanding debt of the concerned person
  • Interest on the refund statement: In some cases, the buyer may take over the seller's loan and must thus add the interest paid by the seller on the reimbursement statement

Here it is important to have documentation of the fees, for example through one's loan documents. For an example of the loan documents, see this article.

Corona has caused bankruptcies, and you can get deductions for that

If the entrepreneurial dreams or family business didn't get through the Corona crisis, there could be a small patch on the wound in the form of a deduction on your 2020 annual return.

The deduction is relevant for those who have started or owned shares in a company that has closed or sold on at a loss. This can be quite large sums, for example, a citizen received a deduction of DKK 1,750,000. for his losses when his business 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 have had to shut it down again later. In addition to Corona closures, there has been a wave of people with IVS companies in the last few years, many of whom have now had to close because IVS' are not allowed from the end of 2021.
The second scenario is if you bought shares in a company and later sold your shares at a lower price than the one you bought them for. Hence, you have had a loss on your shares, and you can get a deduction for that.

For both scenarios, it is important that the deduction does not concern listed companies, as losses are typically reported automatically by the exchange. In addition, the loss must be final, i.e. it must be deregistered with the Danish Business Authority.

The deduction itself is the money you have lost. That is, if you start a company with 40,000 kr. and it then goes bankrupt, you get a deduction of 40,000 kr. You could potentially get a bigger deduction if you've put money into the company subsequently too.

See what deductions you can get on your annual return

There are over 20 different deductions to report yourself to SKAT. And this deduction jungle can be hard to navigate. Here, the 2020 annual return is no exception.

That's why we in Tax Helper have created an easy and intuitive platform where you can easily see if you can get the deduction and get all the way across the finish line in reporting your deduction to SKAT. It takes no more than 15 minutes and users get an average of 2,704 kr. back in taxes.