Section 5: Students, the unemployed and pensioners
5.3. Recipients of maintenance allowances and cash benefits, pensioners and early retirement
5.1. While studying
State education grants and other forms of support during education
All students receive the Danish state education grant (SU). This state education grant ensures that all young people have equal access to education. The state education grant consists of a grant and the possibility of taking out cheap student loans. The amount of state education grant is dependent on age, whether or not the student lives at home and, in some cases, the parents’ income.
The state education grant is taxable. However, labour market contributions and contributions to labour market supplementary pension scheme (ATP) and the special pension savings are not payable. Depending on the size of the grant, some students may not use all of their “no-tax” card (personal allowance). In these cases, the entire grant is tax-free.
Other forms of support during education are also taxable. This applies to the educational allowance given to those on unemployment benefits if they choose to take an education and school payment paid to students undertaking a basic vocational program.
Income from employment
Many students supplement their state education grant with income from employment.
Such wages are naturally taxed in accordance with the normal rules. However, students should be aware that there are limits for how much money can be earned to supplement the grant before some of the grant has to be repaid.
Unlike wage earners, students are not allowed to deduct various expenses from their tax. Education is not work and the state education grant and other public grants in connection with education are not considered wages. The normal conditions for deducting expenses have therefore not been met.
Only students with employment in addition to their studies can deduct expenses related to their work, see section 4.3.
Students have no commuting allowance for transport between their home and place of education but they receive a discount on monthly season tickets for public transport.
Scholarships
Scholarships from foundations or similar are a supplement to the state education grant and are a possible source of income. Normally, scholarships are included in taxable income. However, scholarships used for study trips abroad are tax free if they are used to cover regular expenses in connection with staying at the foreign place of study.
5.2. When education has ended
Repayment of student loans
When education has been completed, students start work and any student loan must be repaid. What is unusual about the student loan is that the loans and interest are not repaid until a few years after the student has graduated. Interest on student loans can be deducted, but as a rule only when the student has to repay it.
Ph.D. students
Some students choose to continue studying as Ph.D. students. A Ph.D. student is employed by an institution of higher education to do research and perhaps some teaching. They have the same status as wage earners and are treated according to the same rules.
5.3. Recipients of maintenance allowances and cash benefits, pensioners and early retirement
Taxing social payments
Payments to recipients of maintenance allowances and cash benefits and to pensioners are treated in accordance with the normal tax rules. However, these groups do not have to pay labour market contributions on their benefits and allowances.
Unemployment benefit, cash benefit and pension payments are personal income in the same way as wage income. The payments are therefore included when assessing taxable income.
The tax is withheld and reported by the institutions responsible for paying the maintenance allowances, cash benefits and pensions. The recipient only has to check that the information given on the income tax return is correct.
ATP
In recent years more people are starting to save for their retirement in order to have some income with which to supplement their national pension.
To ensure that people who have not been active on the labour market for longer periods of time are not worse off than others when they retire, recipients of maintenance allowances, cash benefits and certain pensions have to pay contributions to the labour market supplementary pension scheme.