According to WHO research, up to 50,000 people in Poland die each year as a result of smog and the diseases it causes. The main source of pollution is the so-called “dill” – the boilers and low-emission stoves used in households.
To encourage Poles to replace their heat sources and insulate their homes, programs such as “Clean Air” and “My Electricity” have been introduced. A very important part of the efforts to improve air quality is also the thermal modernization tax credit. This is a tax relief, which consists in the possibility of reducing the tax base in the annual settlement of personal income tax by deducting from it the cost of thermo-modernization of the building. As a result of such action, the tax liability is reduced.
Thermal modernization tax credit – will it be in 2023?
The thermal modernization tax credit in 2023 will apply under similar rules as in the previous year. Taxpayers will again be able to deduct from their taxes expenses incurred, among other things, for improvements that reduce a building’s demand for energy and usable water, as well as primary energy losses in local heating networks. A thermomodernization project is also the conversion of energy sources to renewable ones.
Thermal modernization relief 2023 – conditions.
According to the rules for granting the thermal modernization relief in 2023, the amount of the deduction can be a maximum of PLN 53,000. This applies to all thermal modernization projects carried out in already existing buildings owned by the person who benefits from the relief.
In the case of expenditures subject to VAT, the amount can be deducted together with tax, provided that it has not been deducted under the VAT Act.
Thermal modernization relief 2023 – who can benefit?
For those interested in receiving the subsidy, the most important question is who is eligible for the 2023 thermal modernization tax credit. According to the regulations, people who own or co-own a single-family residential building are entitled to receive it. These individuals may earn income that is subject to:
-on a flat tax,
-according to the tax scale,
-those whose income is taxed in a lump sum on registered income.
Pensioners can also benefit from the 2023 thermomodernization tax credit.
Importantly, the thermal modernization relief can be deducted by owners and co-owners of existing buildings. However, this does not mean that people who have recently built a house cannot take advantage of it. In 2022, the thermal upgrading tax credit for new homes is available if they were completed before the thermal upgrading project began.
Thermal modernization relief 2023 – what can be deducted?
The thermal modernization tax credit is an incentive for property owners and co-owners who are able to finance the project with their own funds or with a loan or credit. However, this possibility applies only to certain materials and services, in accordance with the list contained in the Decree of the Minister of Investment and Development of December 21, 2018 on determining the list of types of building materials, equipment and services related to the implementation of thermomodernization projects. According to the aforementioned Decree, under the 2023 thermal modernization tax credit, you can deduct:
-heat pumps,
-photovoltaic cells,
-heat node,
-window and door frames (windows, interior and exterior doors, garage doors),
-boilers, gas tanks, collectors,
-building materials used to insulate the building envelope, balcony slabs and foundations,
-connections to heating or gas networks,
Services are also deductible:
-energy audit,
-design documentation,
-insulation,
-replacement of woodwork,
-assembly of boiler and appliances.
Thermal modernization relief 2023 – how to calculate?
For the thermomodernization tax credit in 2023, the limit of expenses that can be deducted from tax is 53 thousand zlotys. Importantly, this amount applies to all projects in all buildings owned or co-owned by the person wishing to take advantage of the relief. This means that if you have several buildings, you can deduct a total of 53 thousand zlotys, rather than 53 thousand for each building.Expenses subject to VAT must be deducted in full, along with the tax; the exception is if VAT has been deducted under the VAT Act. The allowance can be deducted on the basis of invoices issued by an active VAT payer. Invoices containing value-added taxes issued by entities from an EU member state are also recognized.The relief is deducted in the tax return on income taxed on a flat tax, tax scale or lump sum on registered income. In practice, how much the 2022 thermal modernization tax credit is depends on the type of taxation.
Thermal modernization allowance Poland 2023 – calculator.
What percentage of the expenses incurred will be the thermal modernization tax credit in 2023 depends on the type of taxation mentioned above, and in the case of those settling according to the tax scale – also on the tax threshold.
However, calculating the exact amount is not difficult. For example, the thermal modernization allowance in 2023 for a person with an income of 80,000 zlotys and settling according to the tax scale, and whose expenses for the project amounted (based on VAT invoices) to 36 thousand zlotys, will be 6120 zlotys. This is calculated on the basis of the tax value for the tax threshold (in this case, the income was less than 85,528 zlotys, which means the first tax threshold; the tax rate in this case is 17%.). Then the expenses incurred that are deducted from the tax base should be multiplied by the tax amount. In this case:
36,000 x 17% = PLN 6,120
Thermal modernization relief 2023 – what documents?
The documents needed for the thermal modernization tax credit to be properly deducted are primarily VAT invoices for expenses related to the investment and a PIT/O.
In the case of invoices, it is important to collect only documents from the year to which the return applies. The amount from all receipts must be added together and then deducted from income or revenue when completing the tax return. This data must be completed in Part B. of the PIT/O document, in the field “Expenses for the thermal modernization project.” The PIT/O, in turn, can be filed with the returns:
-PIT-28,
-PIT-28S,
-PIT-36,
-PIT-36S,
-PIT-36L,
-PIT-36LS,
-PIT-37.
When deducting the thermal modernization allowance, you should also pay attention to the type of settlement. With a flat tax, the 2023 thermal modernization relief should be deducted from income. On the other hand, in the case of a flat tax or tax scale, it is deducted from income (i.e. income minus the costs of obtaining it).
In addition, when including specific expenses in the list of thermal modernization costs, you need to make sure that they are included in the list of deductible materials and services specified by the legislature for the 2023 thermal modernization tax credit.
Thermal modernization relief – when can it be calculated?
The thermal modernization tax credit is effective as of January 1, 2019, when the provisions introduced by the Law of November 9, 2018 amending the Law on Personal Income Tax and the Law on Lump Sum Income Tax on Certain Income Earned by Individuals (Journal of Laws of 2018, item 2246) came into force. This means that the expenses incurred for the thermal modernization of the house were first deductible in 2020.The thermal modernization tax credit in 2023 is available to those who incurred expenses for this purpose in 2022; the exception is when the expenses are not covered by the taxpayer’s annual income or revenue. In such a situation, it is possible to settle the relief in subsequent years.
Thermal modernization relief – until when?
It is important to know until when the thermal modernization relief applies. Expenditures for projects in this field that are not covered by income for a given tax year can be deducted up to 6 years from the end of the tax year in which the first expense was incurred.
However, it is worth bearing in mind that if the thermal modernization project is not completed within three years from the end of the tax year in which the first expense was incurred, the deduction will have to be refunded. The refund consists of adding to the income for the tax year in which the aforementioned deadline passed the amount that was previously deducted.
The rules for accounting for the thermal rehabilitation tax credit in 2023 are not complicated. In practice, in order to do so, a thermal modernization project must be started, purchasing only those products and services included in the ministerial list. In addition, the work must be completed within three years. During this time, you can deduct the expenses incurred in a given year in your PIT return on an ongoing basis. You can use one of the many programs that make it easier to fill out your tax return, reducing the risk of making a costly mistake.
