Renting real estate has been one of the most popular forms of capital investment for years. However, for the investment to be profitable and secure, it's essential to properly settle income tax. Since 2023, legislators have introduced significant changes that, in practice, have limited the tax treatment options for so-called private rentals. Therefore, it's worth knowing the current rules and when it's worthwhile to consider running a business.
Private rental – only a lump sum on recorded income
As of January 1, 2023, private rentals, i.e., those not conducted as part of a business activity, can only be taxed at a flat rate on recorded income. This means that taxpayers no longer have the option of choosing a tax scale or a flat tax.
Flat rates
- 8,5 % – for revenues up to PLN 100,000 per year and
- 12,5 % – for the surplus over PLN 100,000 per year
Importantly, the lump sum is a tax from income, not on income. This means that you cannot reduce your tax base by rental-related costs, such as:
- renovation expenses,
- purchase of equipment,
- mortgage interest.
For many landlords, this is a significant limitation, especially when the property requires capital expenditure or is financed with a loan.
When should you consider renting as a business?
If a landlord wants to be able to deduct expenses for income, they should consider running their rental business as a business. In this case, other taxation options are available:
- tax scale (12% and 32%),
- flat tax (19%).
Renting as part of a business activity allows you to deduct expenses, which can significantly reduce your tax base.
Depreciation Limitation
From 2023, entrepreneurs they cannot depreciate residential premises, even if they are used for business activities subject to a scale or flat tax. This is a significant change that impacts the profitability of running a rental business, especially in the case of new or expensive properties.
Private rental or business activity – what to choose?
The choice of taxation method depends on the taxpayer's individual situation. Private rentals taxed at a flat rate are a simple and beneficial solution for those who:
- do not incur high costs related to real estate,
- they rent on a small scale,
- want to keep formalities to a minimum.
On the other hand, entrepreneurial activity may be more profitable or in some situations mandatory when:
- real estate costs are significant,
- the rental is organized and continuous,
- the taxpayer owns several or more properties,
- Major investments in renovations or equipment are planned.
If you're unsure which taxation method will be most beneficial for you, it's worth consulting a specialist. Every tax situation is different and requires individual analysis from both a tax and organizational perspective, and the right choice can yield real savings. Therefore, we encourage you to contact us. We'll be happy to help you make the best decision.
