One of the types of income subject to personal income tax is income from the sale of real estate. The real estate tax deduction, as a rule, is associated with the costs of purchasing a house, apartment, land, which are deductible or reduce personal income tax. What features of the tax deduction apply in Poland? More on this briefly below.

Income from the sale of real estate of an individual is such income from the sale:

• immovable property or part thereof and shares in immovable property,
• cooperative ownership of residential or corporate premises and the right to an individual house in a housing cooperative, perpetual use of land, etc.

Individuals who sell real estate before the expiration of five years from the end of the calendar year in which it was purchased or built are generally liable to pay a 19% income tax.

The tax deduction for the sale of real estate in Poland (ulga mieszkaniowa) makes it possible to reduce such tax on personal income.

To take advantage of this deduction, the taxpayer must direct the funds received from the sale of real estate for their own housing purposes no later than three years after the end of the tax year in which the real estate or property rights were sold. These expenses for housing purposes include:

• buying a house or apartment,
• purchase of land for construction,
• construction, reconstruction, adaptation of a residential building,
• repayment of housing loans.

A taxpayer who has spent part or all of the funds from the sale of real estate for his/her own housing purposes can calculate what part of the income (or all income) from this sale will be exempt from personal income tax.

Calculation of tax deduction (income exempt from tax) when selling real estate:

income from the sale of real estate (income – expenses for housing purposes) x expenses for housing facilities / income from the sale of real estate

Expenses for housing facilities include those documented expenses that increase the value of real estate and property rights, such as:

• purchase of a gas stove, electric or gas-electric stove, kitchen hood, dishwasher, washing machine, refrigerator,
• purchase of a pedestal, which is a washbasin attachment element,
• purchase of interior ceiling and wall lighting,
• purchase of furniture characterised by a permanent relationship with the construction site or its part (room), made to order, i.e. built-in wardrobes, storage spaces, dressing rooms,
• purchase of furniture in the kitchen.

Also, such expenses include the payment of inheritance and gift tax in the part related to the value of the sold real estate or property rights.

Example 1. A taxpayer sold an apartment in 2021 for PLN 200,000. The cost of buying an apartment in 2018 was PLN 180,000. The funds received from the sale of real estate were used to purchase a plot for the construction of an individual house.

Income exempt from income tax (tax deduction) is PLN 20,000. = (200,000 – 180,000) x 200,000 / 200,000.

That is, if the taxpayer directs all income from the sale of real estate for their own housing purposes, then such income is exempt from personal income tax.

Example 2. A taxpayer sold a house in 2021 for PLN 450,000, which was purchased in 2018 for PLN 380,000. The cost of its improvement, i.e. housing facilities, is PLN 40,000. The funds received from the sale in 2022 were used to purchase an apartment in a house under construction in the amount of PLN 300,000.

Income exempt from income tax (tax deduction) is PLN 139,999. = (450,000 – 300,000) x 420,000 / 450,000.

Taxable base for income tax PLN 10,001 = 150.000 – 139.999.

Tax after sale of real estate is PLN 1,900 = 10.001 x 19%.

Personal income tax on the sale of real estate is not charged if such a sale occurs in the course of entrepreneurial activity and after 5 years after the end of the calendar year in which the property was purchased or built.

When receiving income from the sale of real estate, form PIT-39 is submitted (from February 15 to April 30, in 2023 by May 2).