Deductions – renting out other dwellings and holiday homes in Norway
Rental income from a residential property and holiday homes that you do not live in or use yourself is taxable from the first krone. This means that you must pay tax on the income you’re left with after you’ve deducted expenses.
Here is an overview of the expenses related to renting out property that you can claim a deduction for in your tax return.
The difference between improvements and maintenance
You may only claim a deduction for expenses related to maintenance. By that, we mean expenses related to work performed to restore the property to its former condition.
Expenses related to work that improves the property or alters the house are considered expenses related to improvements. You cannot claim deductions for expenses related to improvements.
If the property was previously of a normal standard and is upgraded to a high standard, the expenses related to the difference between normal and high standard will be considered an improvement.
The form for specification of maintenance and improvements (in Norwegian only) may be helpful in order to decide which expenses are related to maintenance and which are related to improvements.
- Performing repairs to the same standard as before
- Repainting a house
- Replacing floors/wall panels, windows, etc. to achieve the same standard as before
- Sanding parquet flooring
- Replacing pipework
- Replacing the water heater with one of equivalent size
- Replacing a bathtub, mixer taps and ordinary taps to achieve the same standard as before
- Replacing kitchen fittings with new ones that are by today's standards, considered to achieve the same standard as before.
- Painting the house for the first time
- Demolishing and moving a wall to make a larger room
- Extension of electrical installations/pipework
- Putting in a fireplace
- When replacing a wood-burning stove with a pellet-fired stove, the added cost associated with the purchase and installation of the pellet-fired stove will be considered an improvement
- If a bathroom is moved to a different room in the house, it’s considered an improvement. The replacement of an old bathroom with one of the same standard as before will be considered maintenance
The limitations below do not apply if you buy a residential property/holiday home that is only used for renting out and not by yourself.
The two limitation rules below will apply if you’ve done the following in the last five years:
- you’ve lived in the residential property and/or have not rented it out at all
- you’ve rented out such a small part of your own home that the rental income was not taxable
- you’ve been taxed for renting out your own home as a short-term rental
- you’ve used the holiday home that you’re now only renting out, yourself
1. Limitation when renting out your property under 6 months in the first year
If you rent out for less than 6 months the first year, and you’ve lived in the residential property yourself, you cannot claim a deduction for any maintenance expenses the first year.
2. Limitation of the deduction in the first five years
If you rent out for more than 6 months the first year, you can claim a deduction for maintenance costs. You can then claim a deduction for the first NOK 10,000, but not for any expenses exceeding NOK 10,000.
The deduction for maintenance expenses is calculated as follows:
Number of years of tax-exempt assessment during the last five years:
The deduction for maintenance expenses:
NOK 10,000 + 50% of the amount exceeding NOK 10,000
NOK 10,000 + 60% of the amount exceeding NOK 10,000
NOK 10,000 + 70% of the amount exceeding NOK 10,000
NOK 10,000 + 80% of the amount exceeding NOK 10,000
NOK 10,000 + 90% of the amount exceeding NOK 10,000
You own a residential property that you have lived in yourself for more than 5 years and from which you have not previously had taxable rental income.
- In year 1 you rent out the entire residential property for eight months, and the rental income is therefore taxable.
- You also rent out the residential property in year 2.
- The maintenance expenses in year 1 amount to NOK 100,000.
The deduction in year 1 will then be NOK 10,000 + (50 percent x 90,000), amounting to (10,000 + 45,000) NOK 55,000.
If the maintenance expenses are the same in year 2, the deduction will be NOK 10,000 + (60 percent x 90,000), amounting to (10,000 + 54,000) NOK 64,000.
Please contact us if you want to know more about limitations to the entitlement for deducting maintenance expenses.
You may claim a deduction for the municipal taxes that you pay for the property you rent out.
You may claim a deduction for property insurance and home contents insurance relating to the rental property.
If you pay property tax for the rental property, this amount is deductible. Wealth tax on the residential property you rent out is not deductible.
You may claim a deduction for expenses relating to advertising the rental property. The same applies if you pay for intermediation and showings in order to find a tenant.
If you pay ground rent for the plot of land in connection with the rental property, this amount is deductible. Ground rent (lease of plot of land) payments must be made to the landowner if you don’t own the plot of land yourself.
You may claim a deduction for electricity, heating and cleaning if you pay for this yourself. If these expenses are included in the rent, you’re considered to pay these yourself.
You may also claim a deduction for cleaning products you paid for.
The wear and tear of furniture and home contents is deductible.
Some investments may be claimed as deductions right away. Others must be depreciated, which means the expense is deducted over several years. When you depreciate an asset, it means you are claiming a deduction for the asset’s reduction in value as the result of wear and tear.
If you rent out the residential property with furniture and home contents included, you may claim a deduction for all your expenses in the year of purchase if:
- they are mainly purchased for use in the rental property, and
- their value is reduced as a result of wear and tear and/or ageing, and
- they have an input value of less than NOK 15,000 or a useful life of less than three years
If you buy a bed for NOK 13,000, you may claim a deduction for the entire amount in the year of purchase. The same applies if you buy a snow shovel that costs NOK 700.
If the purchase price of furniture and fixtures is NOK 15,000 or more, you can depreciate the cost (balance group d, depreciation rate 20 percent). In practice, it will never reach zero, but when the amount is less than NOK 15,000 (before this year’s depreciation), the entire residual value (balance) is deductible.
- If you buy a couch that costs NOK 30,000 in year 1, you can claim a deduction for depreciations amounting to (30,000 x 000 x 20 percent) NOK 6,000 in the first year.
- In year 2, the residual value is (30,000 – 6,000) NOK 24,000, and you can claim a deduction for depreciations amounting to (24,000 x 000 x 20 percent) NOK 4,800 for the second year.
If you rent out a furnished property for less than three years, and you as the owner use the furniture yourself before and after the rental period, you can claim a deduction for 15 percent of the gross rental income instead of deducting declining-balance depreciations.
- You’ll be renting out your furnished residential property for two years.
- The agreed annual rent is NOK 200,000.
- Instead of declining-balance depreciations, you can claim a deduction for depreciations amounting to (200,000 x 15 percent) NOK 30,000 in both year 1 and year 2 (in total, NOK 60,000).
- You may claim a deduction for common expenses that you pay to the housing association or the jointly owned housing company where your rental property is located.
- You cannot claim deductions for payments of common debt. If these payments are included in the common expenses, you must deduct them from the common expenses before you claim the deduction in your tax return.
- Interest on common debt are not deductible when calculating the taxable rental income.
You can claim a deduction for travel expenses connected to the rental. For example, showings, maintenance and supervision. Presuming the rental activity is not considered business activity, you can claim a deduction for your actual costs. If you use your own car, you can claim a deduction according to the rate for business travel.
If you run the rental activity as a business, you can claim a deduction according to the general rules for travels to/from work and business travels. In the case of up to 10 trips per year to a rental property or if you’re required to spend the night away from home, the trips are considered business travels. If the travelling involves more than 10 days a year and you do not stay overnight on the trip(s), this will be considered work-related travels. If you’re not sure whether the trip is work-related travel or business travel, contact the Tax Administration.
If you’ve opened a security deposit account in your bank in connection with the rental, you can claim a deduction for the fee.
You may claim a deduction for expenses related to surveys of your residential property when reporting information about the area in order to assess the taxable value of your property.
You can claim a deduction for the value of your own work effort if you carry out maintenance work on your rental property. However, this presumes that the same amount has been entered as income in your tax return in the same year that you carried out the work. This is because the value of the work you carry out is taxable. You can only claim a deduction for this in the same year that you carried out the work.
The value of the work you carry out must be set to what it would have cost to have work of the same quality performed by others. The hourly rate for non-tradesmen must generally be set lower than what a tradesman would have charged, for example to the hourly rate for unskilled labour. You can find the rates on the Norwegian Labour Inspection Authority’s website.
The value of the work you carry out related to improvements cannot be deducted, but the value of such work can be added to the input value if you later sell the property. The value of the maintenance work you carry out cannot be added to the input value if you later sell the property.
Deductions in other rental circumstances
Do you have questions about what you can deduct when you rent out the entire home that you live in yourself or part of your own home (the house you live in)?
Applicable rules for the renting out of other dwellings/holiday home that you do not live in or use during holidays and leisure time:
You cannot claim a deduction for expenses related to the renting out of your own holiday home if you use it yourself.