Child tax credit - who is entitled to it and how to settle it?

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After the end of the tax year, taxpayers are required to settle accounts with the tax office and submit an annual tax return, which is information about the revenues earned and costs incurred during a given year. For some taxpayers, it is possible to take advantage of tax benefits. One of them is child relief. Check who can use it and how to settle it!

Discount for a child - who is entitled to?

A child relief is one of the tax reliefs that reduces the value of the income tax due for a given tax year. Pursuant to Art. 27f paragraph. 1 of the Personal Income Tax Act, it may be used by a taxpayer who:

  • exercises parental authority,
  • is the legal guardian of the child, if he or she lives with him,
  • takes care in the form of a foster family on the basis of a court decision or an agreement concluded with the starost,
  • chose the form of taxation on general principles (tax scale).

It is also important that the deduction can be made both in the case of minor children and children up to the age of 25 who continue education, and their annual income does not exceed PLN 3,089 (except for the survivor's pension).

At the request of the tax authorities, the taxpayer is obliged to present the documents necessary to determine the right to the relief:
• a copy of the child's birth certificate;
• a copy of the court's decision establishing a foster family or an agreement concluded between the foster family and the starost;
• a certificate from the family court on the appointment of the child's legal guardian;
• certificate of attending school by an adult child.

Another condition for applying the child tax credit is the income limit. While in the case of two or more children, the amount of the taxpayer's income does not affect the relief, in the case of one child it does. Pursuant to Art. 27f paragraph. 2 above of the Act, taxpayers who have one child will benefit from the relief if their income in the tax year does not exceed:

  • PLN 112,000 - for married taxpayers,
  • PLN 56,000 - for an unmarried taxpayer.

The exception are single-parent taxpayers. In their case, the limit is, as for married taxpayers - PLN 112,000. In order to take advantage of the pro-family relief, the form of taxation of the taxpayer's income or income is also important, as not everyone can take advantage of this tax relief. We distinguish the following forms of taxation:

  • General rules,
  • flat tax,
  • lump sum on registered revenues.

Activities taxed on general terms

Taxpayers who pay tax on general terms pay the tax at the rate of 17% or 32%. This form of taxation entitles taxpayers to benefit from tax benefits. Both a taxpayer who conducts business activity may settle the tax relief in the PIT-36 annual tax return, and a full-time taxpayer in the PIT-37 annual tax return.

To download:

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Pro-family tax relief in the annual tax return - KIS brochure.pdf Description: manual completion

Example 1.

Ms Ewelina has three minor children and conducts business activity subject to general taxation. Ms Ewelina's income in the fiscal year 2020 is PLN 100,000. Can Ms Ewelina take advantage of the child relief in the settlement for 2020?

Yes, due to the fact that Ms Ewelina accounts for income tax on general terms, she can take advantage of the child relief. Additionally, the fact that she has three children means that she does not apply the tax limit (PLN 56,000).

Example 2.

Mrs. Małgorzata and Mr. Łukasz run a business on general terms and have two children aged 10–13. In 2020, they achieved an income of PLN 200,000. Therefore, can they take advantage of the pro-family tax relief in the PIT-36 annual tax return for 2020?

As a rule, taxpayers who settle accounts according to general rules may settle a child allowance in PIT-36. The PLN 112,000 limit does not matter if taxpayers have at least two children. Therefore, Mrs. Małgorzata and Mr. Łukasz can take advantage of the child relief. Taxpayers who settle accounts on general terms may benefit from tax reliefs. If a married taxpayer wants to settle the allowance for one child, the limit of PLN 112,000 applies, as a rule, taking into account both the income earned by him and his spouse. If the spouse taxes his / her income on a flat-rate basis, his / her income is also included in the limit, even though he / she cannot benefit from the tax relief himself.

Example 3.

Ms Michalina runs a company and pays progressive income tax. Her husband, Mr. Arkadiusz, has income taxed on a straight-line basis. Together, they raise their two-year-old child. In 2020, Ms Michalina's income was PLN 55,000, and Mr Arkadiusz - PLN 75,000. Can Ms Michalina take advantage of the child relief in the settlement for 2020?

No, Ms Michalina cannot take advantage of the child tax credit because the sum of both her and her husband's income exceeds the limit of PLN 112,000.

Linear business taxation and child relief

Entrepreneurs conducting business activity taxed on a linear basis pay a tax of 19% calculated on their income. Although this is a favorable rate, because taxpayers, regardless of the amount of income, always pay 19% of income tax, it makes it impossible to take advantage of tax reliefs in the PIT-36L annual tax return, e.g. child relief.

Example 4.

Mr. Janusz conducts business with a linear taxation. She is raising her five-year-old daughter alone. Can he / she take advantage of the child allowance in the annual settlement?

No, child relief is not available to flat taxpayers.

Example 5.

Ms Martyna achieves income that is taxed on a straight-line basis, while her husband runs a sole proprietorship and settles accounts on general principles. The spouses raise three children together. Can Ms Martyna settle the pro-family tax relief in the PIT-36L annual tax return?

No, Ms Martyna cannot settle the child allowance, because she has a linear settlement, but her spouse who settles accounts according to general rules may take advantage of the pro-family allowance in the PIT-36 tax return.

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Lump sum on recorded income and child relief

Taxpayers settling on a lump-sum basis on recorded revenues pay income tax depending on the type of goods sold or services rendered. Lump sums submit the PIT-28 annual tax return, but they cannot settle the child tax relief in it. This form of taxation excludes child relief.

Example 6.

Ms Krystyna runs a sole proprietorship and pays tax in the form of a lump sum on recorded income. Can he / she benefit from child relief in the annual tax return?

No, Ms. Krystyna will not benefit from the tax relief due to the form of taxation. As a rule, lump sums cannot settle pro-family concessions.

It also happens that taxpayers operate on a lump-sum basis and work full-time, where their income is taxed on a straight-line basis. In such a situation, they cannot take advantage of the child relief in the settlement of income from activity in PIT-28, but due to their full-time employment, they are also obliged to submit the PIT-37 annual tax return, in which it is already possible to settle the child relief.

Example 7.

Mr. Tomasz runs a company (flat rate) and works full-time (general rules). At the end of the tax year, he submits two annual tax returns - PIT-28 and PIT-37. Can I take advantage of the child tax credit?

Due to the fact that Mr. Tomasz, apart from running a business on a lump sum basis, also works full-time, he can settle the child allowance, however, it is possible in PIT-37, not in PIT-28

If the taxpayer runs a business on a lump-sum basis and additionally works full-time on general principles, only the income taxed on general principles should be included in the limit entitling to benefit from the allowance for a child. Lump sum income is not included in the limit, which results directly from Art. 27f paragraph. 2a of the Personal Income Tax Act.

Example 8.

Ms Joanna works full-time (general rules) and conducts business in the form of a lump sum. In the fiscal year, the company achieved full-time income of PLN 55,000 and operating income of PLN 70,000. Can Joanna take advantage of the discount for her only child?

Yes, Joanna can take advantage of the child allowance, because the income, which is compared to the allowance limit, did not exceed PLN 56,000, despite the fact that Joanna's physical income exceeded PLN 56,000. Nevertheless, the lump-sum income is not taken into account in the limit entitling to the settlement of pro-family tax relief.

Relief for a child - accounting

The child allowance is settled in the annual PIT-36 declaration (submitted by entities conducting business activity) or PIT-37 (submitted by persons, inter alia, working full-time), by attaching the PIT / O attachment to the tax return, which shows the number children, the amount of the discount and information about children.

In the annual tax return for 2020, in accordance with the Ministry of Finance's draft, the child allowance is shown in the PIT / O Annex in Part C in items 44 (number of children), 45 (if present as a taxpayer) and 46 (if present as a spouse). Additionally, in Part E, information on children for whom the relief is used should be provided.

The amount of the discount should also be shown in part J (in the case of the PIT-36 form) or in part G (in the case of the PIT-37 form). The taxpayer may be entitled to child relief for the entire year or for several months. The taxpayer should remember that it is necessary to have documents confirming the possibility of taking advantage of the child relief, e.g. a child's birth certificate or a certificate of parental responsibilities. To sum up, the child relief is available to a taxpayer who settles accounts with the tax office on general terms. It is not settled during the year, but only at the time of generating the annual tax return for a given tax year.