Income included in personal income:
Wage, profit from business, fees, fringe benefits, old age pension, unemployment benefit, early retirement benefit, private pension, economic support from other sources, etc.
Deductions made in the computation of personal income:
Labour market contribution, operating costs for self-employed persons, contributions to pension funds (either by deduction on the tax form or by leaving them out of account of wage income for the employer administered contributions) etc.
Taxable income is personal income plus net capital income minus assessment deductions.
The tax liability on the net income is reduced by the tax value of a uniform personal allowance for central and municipal income tax purposes, church tax included. In 2011 the personal allowance was DKK 42,900, and DKK 32,200 for persons under 18 year.
Net capital income (positive or negative) is included in taxable income, which is the base for municipal health tax and church taxes.
The basis for progressive state taxes is personal income plus positive net capital income. Hence, the taxable value of interest payment deductions (negative capital income) is determined by the flat local tax rate, and not by the progressive state income tax rate.
There is an earned income tax credit at 4.25% of wage income up to max. DKK 13,600 that is taken into account in calculating health tax and local income tax base (taxable income).
Some other deductions are taken into account only in calculating local income tax base.
Unused personal allowance is transferred to the other spouse in assessing the base tax. If one of the spouses has income below and the other spouse above the medium tax threshold, the unused allowance for medium tax is transferred to the other spouse, in assessing the medium tax.