The Danish government has proposed the reintroduction of a tax deduction for home improvement services, a decision that raises some skepticism among researchers. The goal of this initiative is to climate-proof Danish homes, but experts such as labor market researcher Bent Greve from Roskilde University believe that a different approach could be more beneficial.

According to Greve, there are several concerning aspects of using the tax deduction for services (known in Danish as “håndværkerfradraget”) as a means to improve climate resilience. “While I can see some advantages, there are also significant risks. The deduction could lead to work that would have been carried out regardless, and we do not necessarily have a problem with a lack of labor,” he explains.

As a result, starting next year, Danes will again be able to deduct certain home improvement expenses from their taxes, alongside an increase in service-related tax deductions. This system was last reintroduced retroactively in 2016, but the exact details of how the deduction will be structured in the upcoming budget are still being negotiated between the political parties.

Greve acknowledges that the tax deduction is popular among homeowners and can provide an extra incentive for them to undertake climate resilience projects. However, he also questions its relevance given the current economic circumstances. “There is currently record high employment in Denmark, and the tax deduction seems more like a tax break for homeowners who are already financially well-off. However, there is an underlying assumption that homeowners are carrying out work that is desirable from a societal economic perspective, which creates a balance,” says Greve.

In conclusion, while the home improvement tax deduction has positive aspects, there are important considerations that should be taken into account when seeking to climate-proof Denmark through this method.