The good news is that Good Finance already has a lot of information about you and completely automatically gives you many of the deductions you are entitled to.
When you borrow money from a bank, a mortgage bank, a finance company or through the overdraft on your credit card, Good Finance automatically gets the information from the bank and deducts the interest itself in your tax.
Get the deduction continuously over the year
Although it is always nice to get excess tax paid, there may be good reasons why you would rather have deducted on an ongoing basis over the tax year. You get that by logging on to your pre-statement with your NemID and writing what you pay in interest on your loans in fields 481 and 483.
Thus, Good Finance gets to know what deductions you are entitled to, and they deduct less from your salary or other income each month.
If you borrow money with someone else
When you borrow money with a co-applicant, you can choose to share the interest deduction. If you borrow money with your spouse, you can write your individual share of the interest expenses on each of your advance bills. You do this by logging on to Good Finance’s key service and correcting your advance bill.
If you and your borrower are not married, you must contact Good Finance to share the interest deduction. You can read more about how you share the interest deduction when you are not married on Good Finance’s website
Does your loan run for less than 2 years?
If your loan runs for less than two years, it is possible to deduct certain expenses associated with setting up the loan. It is often called creation fee or formation cost. You must inform Good Finance of this type of expenses yourself by correcting your advance statement. How much you can deduct in tax depends on the percentage of the creation fee or founding cost of the amount you borrow.
If the creation fee equals 2.5% or less of the amount you borrowed, you may be deducted for the entire fee in the year in which you borrowed the money.
Example: You borrow DKK 40,000 in 2018 and pay DKK 1,500 in setup fee. In 2018 you can withdraw DKK 1,000 in tax and in 2019 you can withdraw DKK 500.
If the creation fee is greater than 2.5% of the amount you borrow, you can be deducted for an amount equal to 2.5% of the loan amount in the year you borrow the money. The portion of the fee that you cannot deduct for in the year of foundation, you can deduct from tax the following year.
Example: You borrow DKK 40,000 and pay DKK 1,000 in the creation fee. You can withdraw DKK 1,000 in tax
Remember that you have to make Good Finance aware of your formation costs by completing your advance statement. Costs to the state, such as registration fees and stamp duty, cannot be deducted from tax. However, when you take unsecured loans, for example through Shrek, the state charges no taxes.
If you have a variable rate loan – eg a home loan – you must again be aware that your deductions are calculated on the basis of Good Finance’s information from last year. If the interest rate has moved significantly compared to last year, it may affect your deductions.
Variable rate loan
If interest rates have risen since last year, you are entitled to a larger deduction from your tax. On the other hand, if it has fallen, your interest deduction will also fall.
If the loan is taken in a bank or a finance then Good Finance will automatically get the information about your loan, but it may affect your final tax account, what information you have given them.
If your interest rate has increased and you have not changed the information in your prepayment, you will be paid excess tax. Conversely, if the interest rate has fallen, you could risk getting an extra bill on missing tax because your deduction during the year has been too high. The interest rate on consumer loans is not variable. Therefore, you do not need to change your advance bill to get the deduction.
Pay your interest – then you get deductions
Always remember that you cannot get interest deductions if you do not pay your services on the loan. It is also important here that you pay the cost of your loan in time. You can only deduct interest expense in tax when interest is paid.
- Get the deduction on an ongoing basis throughout the year: Write your interest expenses in fields 481 and 483 in the advance statement
- If you are borrowing money with someone else: You both need to correct your bill
- Deduction for creation fee: If you borrow money for less than two years
- Variable rate loans: Update your prepayment if interest rates have changed
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