Private rental – only until the end of 2022 settled according to the tax scale

Changes in private rental settlement

Real Estate Attorneys of our Law Firm in Poland inform that in 2022 Polish taxpayers have the last chance to change the form of taxation of private rental to the tax scale. From 2023 they will no longer have a choice, as the mandatory way of taxing income from this source will become a lump sum.This is the last year when income from private rental is taxed according to the scale.

Currently, persons earning income from the so-called private rental can choose between two solutions: a lump sum on registered income with the rate of 8.5 percent (and 12.5 percent on the amount exceeding PLN 100 thousand per year) and the PIT scale (17 percent on income, 32 percent on the amount exceeding PLN 120 thousand per year).

Polski Ład introduces two fundamental changes, due to which taxation of profits from private rental according to the tax scale may become more favourable than a lump sum tax. Firstly, the second tax threshold has increased from PLN 85 528 to PLN 120 thousand per year. Secondly, Polski Ład increases the tax free amount to PLN 30 thousand per year.

Which will be more profitable?

These changes mean that the tax scale, despite the higher tax rate, may become more profitable for taxpayers with smaller profits from private rental (they will not pay income tax on PLN 30 thousand of income per year).

Additionally, in the case of larger investments (e.g. apartment renovation) or other costs, the tax scale may also turn out to be more profitable, due to the possibility of settling tax-deductible expenses.

It should be remembered, however, that income taxed according to the tax scale is accounted for jointly, and this may lead to the fact that in the case of other sources of income taxed in the same way, taxpayers will pay tax on all income at the rate for the second tax threshold (32 percent). In addition, the registered income lump sum remains the simplest form of accounting for private rental.

Tax scale for private rental only until the end of 2022

The above considerations will remain valid only until the end of 2022. After this date, the private rental may be settled exclusively in the form of a lump sum.

Do you rent an apartment in Poland and want to change the way you settle with the tax office? Are you wondering what is the most beneficial form of taxation of private rental?

If you have any questions concerning the methods of accounting for renting an apartment or changing them, please contact our Real Estate Law Firm in Warsaw, Poznań, Kraków and Wrocław.