Doing business in an apartment and benefits
Many entrepreneurs decide to run a business in their own apartment because of the specificity of their work. How to settle expenses related to housing and what tax benefits can this solution bring? You will find the answer to these questions in the article below.
A flat as a fixed asset
A part of an apartment or house that is intended for the needs of business activity may constitute a fixed asset of the company, and thus may be subject to depreciation.
As it results from the act on personal income tax, structures, buildings and premises owned separately and with a longer expected period of use are subject to depreciation, owned or jointly owned by the taxpayer, acquired or manufactured on their own than a year, used by the taxpayer for the purposes related to his business activity. The acquired cooperative ownership right to a dwelling, suitable for economic use on the day of acceptance for use, is also subject to depreciation.
In order to be able to depreciate a flat, the above-mentioned criteria must be met. conditions.
Doing business in an apartment - depreciation of the premises
A taxpayer may use one of two acceptable methods of depreciation of a dwelling:
- depreciation on general terms, or
- simplified depreciation.
It is worth noting that the cooperative ownership right to a flat and the right to a single-family house in a housing cooperative are also subject to depreciation.
Depreciation of an apartment on general terms
According to the principle described in Art. 22f paragraph. 4, in a situation where the entrepreneur uses only part of the real estate, building or residential premises to conduct business activities - depreciation write-offs are made in the amount determined from the initial value of the property, building or premises, corresponding to the ratio of the usable area used for business activities to the total area use of this property, building or premises.
How to determine the initial value of the premises? There are various methods for this, depending on the method of acquiring the fixed asset, as described in Art. 22g of the Personal Income Tax Act and the article - valuation of fixed assets.
The entrepreneur operates in an apartment with a total area of 90 m2. The room designated for activity has an area of 20m2. The value of the entire apartment is PLN 360,000. What will be the initial value of the business room that will be subject to depreciation?
1. Determining the price for 1 m2
PLN 360,000: 90 m2 = PLN 4,000 / m2
2. Determining the initial value of the separated part of the apartment
20 m2 x PLN 4,000 / m2 = PLN 80,000
The list of annual depreciation rates in the annex to the Personal Income Tax Act clearly indicates that in the case of a dwelling, the depreciation rate is 1.5%.
Pursuant to Art. 22j paragraph. 1 point 3 above of the Act, the taxpayer may individually determine the depreciation rates for used or improved fixed assets entered in the records of a given taxpayer for the first time. However, the depreciation period in this case cannot be shorter than for buildings (premises) and structures other than those mentioned in points 4-10 years (10% annual depreciation rate).
Example 1 cd.
3. Establishing the annual depreciation write-off
PLN 80,000 x 1.5% = PLN 1,200
4. Determining the monthly depreciation write-off
PLN 1200: 12 months = PLN 100
Simplified depreciation of an apartment
In this case, Art. 22 g of paragraph 1. 10 of the Personal Income Tax Act, which states that: taxpayers may determine the initial value of residential buildings or residential premises: rented, leased or used by the owner for the purposes of his business activity, assuming in each tax year the value of the product of square meters the usable area of the building or premises rented, leased or used by the owner and the amount of PLN 988, with the usable area being the area accepted for real estate tax purposes.
As in the case of depreciation on a general basis, the 1.5% per annum rate will also apply here.
Depreciation of the cooperative ownership right to a dwelling and the right to a single-family house in a housing cooperative
These are intangible assets that are depreciated using an annual depreciation rate of 2.5%.
Housing costs and company costs
In a situation where the entrepreneur uses part of the apartment or house to conduct business, he has the right to charge part of the expenses he incurs to maintain the property.
Expenses related to the operation of the apartment must be divided into those related to the conducted activity and those of a personal nature.
The distribution of costs related to rent and consumption of utilities (electricity, heating, water, etc.) should be made in a proportionate manner, for example by calculating the percentage of the area used for the activity in the total area of the property.
Expenses related to payments for rent, electricity, telephone, Internet, water, gas and central heating attributable to business activities can be documented with internal evidence by attaching invoices / bills to them and marking the calculation method.
For a home telephone that is used for both personal and business purposes, telephone billing is an appropriate method of allocating costs. In the case of a subscription, the taxpayer should settle it according to the proportion resulting from the ratio of private and business calls.
When accounting for Internet costs, difficulties may arise in identifying the tax-deductible portion. If the Internet bill comes together with the telephone bill, then the taxpayer may use the proportion of telephone calls. Otherwise, the proportions should be established - in what part the Internet is used for business purposes and what is used for private purposes.
The issue of home loan interest
The taxpayer may include as tax deductible costs the interest on the loan taken out for the purchase of an apartment (house) in proportion to the amount used for running a business.
Then, based on the prepared internal proof, the costs are booked in the col. 13 of the KPiR. The proof of payment of interest and a copy of the loan installment repayment schedule should be attached to the prepared proof.
Sale of an apartment as a fixed asset
Pursuant to the applicable regulations, the sale of a dwelling that was entered into the register of fixed assets and was subject to depreciation does not generate income from business activity. This income is generated on a private basis. This position is adopted by Art. 10 sec. 1 point 8a and section 3 of the Personal Income Tax Act.