Taxable value when your residential property or holiday property has been damaged or destroyed

When your residential property or holiday property has been damaged or destroyed in such a way that the market value has been reduced, this may affect the taxable value. 

The property’s value at the end of the year determines the taxable value.

Damage may occur to the buildings, for instance in the case of a flood or fire. Damage may also occur to the land itself, for instance in the case of landslides. The market value of the property could be reduced even without the property being damaged, for example in the case of a natural disaster nearby.

Residential properties

If your residential property has been damaged but is not uninhabitable, and as a result the actual market value is lower than the Tax Administration’s calculated market value, you can request a reduction in the taxable value.

You must be able to document the market value if we ask you. 

Holiday properties

If your holiday property has been damaged, you can request a reduction in the taxable value if you can document that the current taxable value is more than 30 percent higher than the holiday property’s actual market value.

You must request a reduced taxable value yourself by entering the new documented market value in your tax return. You must be able to document the market value if we ask you. 

Important information

In 2023, the basement of your home suffered serious water damage after a flood. You could still live in the house, but the damage was extensive and the property’s market value was considerably reduced.

In order to obtain a new taxable value, you must enter the new, documented market value in the tax return for the 2023 income year. You must include the documentation.

In 2023, there was a large landslide in the area where your cabin is located. Neither your cabin nor the land you own were damaged or are at risk of being damaged by a future landslide.

The landslide damaged the hiking area around the cabin and affected the area’s popularity, causing a fall in the market price of cabins in the area.

In your 2023 tax return, you can request a reduction in the taxable value if the taxable value listed is more than 30 percent higher than the documented market value.

If your residential property or holiday property has been so badly damaged that it’s no longer habitable, you must change both the value and property type in your tax return for the net wealth taxation of the property to be correct.

Under “Property type” in your tax return, you can change the property type to “Plot of land” or “Other real property outside income-generating activity”.

How to enter this in your tax return

  • If you can still build on the property, select the property type “Plot of land”. This is the case, for example, if the building on the property has been damaged by a fire and has to be or has already been demolished and can be rebuilt on the property.

  • If the property has been damaged to the point that it’s not possible to build on it, select “Other real property outside income-generating activity”. This is the case, for example, if a flood or a landslide has destroyed the land and it’s no longer possible to build on the property.

In both cases, you must also request a reduction in the taxable value yourself by entering the new documented market value in your tax return. You must be able to document the market value if we ask you. 

The compensation amount for the loss of your home – primary dwelling – in a fire or to natural disaster must be calculated at the same percentage rate as the lost property in the payment year. 

Taxable value for primary dwelling – the 2023 income year

Two-step rates have been introduced when calculating the taxable value of primary dwellings with a sales value of more than NOK 10 million.

  • For primary dwellings with a sales value of up to NOK 10 million, the taxable value is set to 25 percent of the sales value. 
  • For primary dwellings with a sales value of up to NOK 10 million, the taxable value is set to 25 percent and to 70 percent when the sales value is more than 10 million.
    For example, a property with a sales value of NOK 11 million will have a taxable value of NOK 3 million. 10 million x 25 percent + 1 million x 70 percent = 3 million.

Compensation amounts paid in 2023 and still remaining by the end of 2023 are set accordingly to 25 percent of NOK 10 million and to 70 percent of any amount exceeding NOK 10 million.

The rule applies for

By “loss of property”, we mean that the property has been completely destroyed or is more or less worthless.

  • The rule only applies to primary dwellings - your home.
  • The rule only applies in the year the compensation has been paid, and only for the part of the compensation that remains at the end of the year.
  • If the compensation amount has been fully or partially used on other assets than a new primary dwelling, or used in other ways, only the remaining part of the compensation amount is covered by this rule.
  • The rule applies regardless of when the damage occurred.
  • If you have acquired a new primary dwelling in the payment year, for example, through a purchase or inheritance, the rule will no longer apply to the remaining compensation amount.
  • Interest earned on the compensation amount is not included in this rule.

The purpose of the rule is to prevent increased net wealth tax for persons who have lost their homes and have not bought a new residential property before the end of the year.

The main rule

Aside from this, the main rule is that bank deposits are included in the basis for net wealth tax with the full amount.

In practice, this means that you have the rest of the payment year and the entire following calendar year to buy a new primary dwelling without having to pay increased net wealth tax because of the compensation payment.

In the year after the payment year, whatever is left of the compensation at the end of the year is included in the basis for net wealth taxation with the full amount. This is the same as with other bank deposits.  

How to enter this in your tax return

You must change your tax return for the income year in which you were paid the compensation. 

The compensation amount still in your bank account at the end of year is shown as a bank deposit in your tax return. You must know how much of the bank deposit is from the compensation.

You must calculate how much of the compensation amount to include in the tax return. It is only that which is left of the compensation amount at the end of year that must be included in the calculation.

The compensation is valued using the same rates as for primary dwellings for the same year. See the rate for taxable value of primary dwelling.

  • If the compensation was paid in 2023 and you’re submitting the tax return for 2023, you use the rates for 2023.
  • If the compensation was paid in 2022 and you’re submitting the tax return for 2022, you use the rates for 2022.
  • If the compensation was paid in 2021 and you’re submitting the tax return for 2021, you use the rates for 2021.
  • If the compensation was paid in 2020 or earlier, this rule does not apply and the compensation must be included in the wealth taxation with the full amount. You do not change the tax return.

Examples

Below you’ll find examples that illustrate different types of damages on homes and properties, how you may have to change the property type in the tax return, how you calculate the capital value of a compensation paid in 2021 and 2022, and what else you have to do in the tax return for the different years.

Important information

Your home – the primary dwelling – burnt to the ground in the summer of 2023.

You were paid a compensation of NOK 15 million in December 2023 and the full amount remained in your account at the end of 2023. The plan is to rebuild the residential property in 2024. At the end of 2023, you had not bought a new residential property somewhere else.

You can change your 2023 tax return by doing the following:
  • you log in and change the property type to “Plot of land”
    • In order to obtain a new taxable value, you must enter the new, documented market value in the tax return. You must include documentation.
    • The reported compensation amount must be reduced by the two percentage rates that apply for 2023. The taxable value of the compensation amounts to NOK 6 million (25 percent of 10 million + 70 percent of 5 million).

In the summer of 2020, your home (primary dwelling) was destroyed by a flood so that you had to move out and rent a property somewhere else while the house was demolished.

The plot of land is still suited for building on.

How to change the 2020 tax return:

  • you change the property type to “Plot of land”
  • you enter the property’s market value at the end of 2020 based on documented market value

In January 2021, you received a compensation payment of NOK 6 million. In February 2021, you sold the property.

You decided to continue renting a property instead of buying a new one. You want to save the money from the compensation.

For the 2021 income year, you receive a wealth discount on the compensation amount but not on the interest on the compensation.

How to change the 2021 tax return:

  • check your tax return to see that you are no longer listed as the owner of the property
  • change the pre-filled bank deposit amount in your tax return. Of the NOK 6 million, you must only enter 25 percent (which is the percentage rate for primary dwellings in 2021). This means that you should change the amount in your tax return to NOK 1.5 million.

Throughout all of 2022, you keep the money from the compensation. In the 2022 tax return, you do not change the reported bank deposit. The full amount will be included in the basis for calculating your wealth.

Your home (primary dwelling) burnt to the ground in January 2021.

In May 2021, you received a compensation payment of NOK 6 million.

Throughout 2021, you spent most of the compensation on rebuilding your home. At the end of the year, the property was still under construction, and you still had NOK 1 million left of the compensation in your bank account.

How you can change your 2021 tax return:

  • change the property information, such as the area in squares metres, the year of construction, etc. based on the residential property that is under construction
  • enter the new market value of the residential property that is under construction set to a proportional share of the completed residential property - How to calculate the taxable value of a residential/holiday property under construction
  • change the pre-filled bank deposit amount in your tax return. You must only enter 25 percent (which was the percentage rate for primary dwellings in 2021) of the remaining compensation. Since there is still NOK 1 million left of the compensation, you only include NOK 250,000 in the tax return.

At the end of 2022, there was still NOK 100,000 left from the compensation in your bank account. Since the special rule for compensation for the loss of primary dwellings only applies to the payment year, you will not benefit from the reduction in the taxable value of the remaining compensation amount for the 2022 income year.

In the 2022 tax return, you do not change the amount that has been reported by the bank.

Your home (primary dwelling) and the ground the house was built on, was destroyed by a landslide in 2020. It is not possible to build on the property.

You can do the following in your 2020 tax return:

  • change the property type to “Other real property outside income-generating activity”

In order to obtain a new taxable value, you must enter the new, documented market value in the tax return. You must include the documentation. If you cannot build on the property or use it in another way, the value will most likely be NOK 0.

In 2021, you received a compensation payment of NOK 10 million for the loss of your property. The entire amount is still in your account at the end of the year.

You can do the following in your 2021 tax return:

  • check that the changes you made to your 2020 tax return regarding property type and value have been continued to your 2021 tax return. If not, you must make the changes again.

You can change the pre-filled bank deposit amount in your tax return. In the basis for the taxable value, you only include 25 percent of the NOK 10 million you received in compensation for your property. You can therefore reduce the amount that is reported from the bank by NOK 7.5 million. This means that you enter NOK 2.5 million.

In 2022, you still have not bought a new property. The entire compensation of NOK 10 million is still in your bank account at the end of the year. For the 2022 income year, you can no longer claim the wealth discount on the compensation since the special rule only applies to the payment year.

In the tax return for the 2022 income year, the entire compensation amount is included in the basis for calculating net wealth tax. You do not change the amount that is reported from the bank in the tax return.

You should, however, check that the changes you made to your 2020 and 2021 tax returns (property type and value) have been taken into account in the 2022 tax return.

Your home (primary dwelling) burnt to the ground in October 2020, but you can still build on the property.

You can do the following in your 2020 tax return:

  • change the property type to “Plot of land”

In order to obtain a new taxable value, you must enter the new documented market value in the tax return. You must include the documentation.

For a long time, you planned to sell your detached house to move into a smaller apartment but then sold the property to a developer in February 2021.

You were paid compensation for the burnt-down primary dwelling in March 2021.

In April 2021, you bought an apartment that you moved into in the summer of the same year. At the end of the year, you still have NOK 500,000 left of the compensation.

You can change your 2021 tax return by doing the following:

  • check your tax return to see that you are no longer listed as the owner of the plot of land
  • check your tax return to see that you are listed as the owner of the apartment you bought in April 2021
  • you will no longer be able to claim a wealth discount on any remaining compensation amount since you now have a new primary dwelling. You must therefore not do anything relating to the compensation amount in your 2021 tax return

In January 2021, your primary dwelling was  destroyed in a fire and had to be demolished. In February 2021, you received a compensation payment of NOK 6 million.

Instead of rebuilding your house, you decide to sail around the world and use the compensation on a sailboat and equipment. At the end of the year, there is only NOK 100,000 left of the compensation. You still own the plot of land at the end of the year.

You can do the following in the 2021 tax return:

  • change the property type from “Self-owned dwelling” to “Plot of land”
  • enter the new documented market value in the tax return, to receive a new taxable value. You must include the documentation.
  • reduce the pre-filled bank deposit amount in your tax return. You only enter 25 percent (which is the percentage rate for primary dwellings in 2021) of the remaining NOK 100,000 of the compensation. You can reduce the pre-filled amount by NOK 75,000. This means that you have to declare NOK 25,000 as wealth.

In the 2022 tax return, you do not make changes to any remaining compensation amount.

If you still own the plot of land at the end of the year, you should check that the changes you made to your 2021 tax return (property type and value) have been taken into account in the 2022 tax return.