Timing Your Home Purchase: A Smart Move in December?
In an insightful report from Proaktiv Eiendomsmegling, managing director Vibeke Stavenes suggests that acquiring a new home in December could be more advantageous than waiting until January.
“When you’re selling a property close to the New Year, the timing of the takeover can significantly impact your tax situation,” Stavenes warns.
Understanding Wealth Tax
Wealth tax is calculated based on your assets at the end of the year. If you receive the full sale proceeds before December 31, that sum will be counted as cash in your account, thus becoming part of your taxable wealth.
“The entire amount appearing in your assets can result in an unexpected and substantial wealth tax bill,” Stavenes explains.
It’s important to note that the tax implications remain the same, regardless of whether those funds are earmarked for a new home. Cash in bank accounts is valued at 100 percent, while primary residences enjoy preferential valuations—capped at 25 percent up to DKK 10 million and 70 percent above that threshold.
Many are surprised to learn that even if the funds are intended for a new purchase just before year’s end, they will still count as assets on December 31, potentially triggering wealth tax.
The Financial Implications
Consider this scenario: you sell a debt-free home for eight million kroner in December, receiving the full amount before year-end. This cash will contribute entirely to your taxable assets, leading to an estimated wealth tax of around DKK 62,000 after exemptions.
“Had the takeover occurred in January, however, you would still own the property at the year’s close. For tax purposes, that eight million primary residence would be valued at only DKK 2 million,” Stavenes clarifies. After accounting for the basic allowance of DKK 1.76 million, only DKK 240,000 would be taxable, translating to a mere DKK 2,400 in tax.
In short, the difference amounts to roughly DKK 60,000, typically depending on debt levels, exemptions, and ownership status.
Avoiding Costly Mistakes
“The wrong timing for your property’s takeover could cost you tens of thousands of kroner,” Stavenes cautions.
For wealth tax due in 2025, the total rate stands at around 1.0 percent on net assets up to DKK 20.7 million, and 1.1 percent on anything above that. Everyone benefits from a basic allowance of DKK 1.76 million, which is deducted before calculations commence.
Practical Steps to Save
Stavenes advises sellers, especially those with higher-end properties, to discuss the timing of their takeovers with both their broker and the buyer.
“More often than not, both parties can find a flexible solution. For the buyer, the timing usually matters little, but for the seller, it can make a significant difference.”
However, Stavenes emphasizes that practical considerations must also play a role in this decision.
“There are scenarios where waiting isn’t feasible—such as if a buyer needs immediate occupancy. And if you’ve already purchased a new home undergoing renovations by year-end, timing becomes even less critical, especially since the cash won’t be available until after the New Year.”
In light of these insights, it’s clear that thoughtful planning around timing can yield significant financial benefits in real estate transactions.
