Purchase of apartment equipment before the start of the lease and BUY
Taxpayers accounting for rental income according to general principles may include in the tax account the expenses incurred that meet the criteria of tax deductible costs. However, it often happens that the taxpayer incurs certain expenses, e.g. buying equipment for the apartment before the start of the lease. Therefore, the question arises whether such purchases may constitute a tax cost?
Equipment in the light of tax regulations
There are no provisions regarding the definition of equipment in the content of the PIT Act itself. What assets are included in this category results from the provisions on fixed assets.
First of all, it should be pointed out that pursuant to Art. 22a paragraph. 1 of the PIT Act, the following are subject to depreciation constituting the property or co-ownership of the taxpayer, acquired or manufactured on their own, complete and fit for use on the date of acceptance for use:
structures, buildings and premises owned separately,
machines, devices and means of transport,
- with an expected period of use longer than one year, used by the taxpayer for the purposes related to his business activity or put into use on the basis of a rental, lease or leasing agreement, called fixed assets.
The presented provision applies not only to taxpayers engaged in non-agricultural business activity, but also to people who rent. In the context of the problem we are analyzing, these provisions will apply.
However, according to Art. 22d paragraph. 1 of the Act: "Taxpayers may not make the depreciation of the assets referred to in article 1. 22a and 22b, the initial value of which, determined in accordance with art. 22 g, does not exceed PLN 10,000; the expenses incurred for their purchase are then tax deductible costs in the month they are put into use”.
The said initial value is the purchase price of the given asset. It is also worth adding that the above-mentioned components are not included in the register of fixed assets.
The taxpayer renting his private property bought a refrigerator worth PLN 3,500 for the apartment. Due to the fact that the purchase price is below PLN 10,000, the value of the refrigerator may be included in the tax costs by the taxpayer once. There is no need to enter the refrigerator into the register of fixed assets and make depreciation.
As a result, it is assumed that under the PIT Act, equipment is an asset whose purchase price does not exceed PLN 10,000. These types of components are not subject to depreciation, but are recognized directly in tax deductible costs. Moreover, it should be noted that the indicated provision uses the phrase "taxpayers may". This means that the legislator has left taxpayers full freedom in this regard. Therefore, it is possible that, on the basis of a taxpayer's decision, an asset with a value below PLN 10,000 will be entered in the register of fixed assets and will be depreciated on general terms.
If the initial value of a given asset does not exceed PLN 10,000, the taxpayer may decide not to include it in fixed assets, which in turn means that the expenditure incurred for its acquisition is recognized once in tax deductible costs.
Purchase of apartment equipment before the start of the lease as a tax cost
When considering the possibility of recognizing equipment expenses as a tax cost, it should be remembered that elementary conditions provided for in Art. 22 sec. 1 of the PIT Act. In this regard, it should first of all be pointed out that there is a close relationship between the expenditure incurred and the possibility of obtaining income.
Such a structure of the provision means that in order to determine whether the expenditure on the purchase of equipment incurred before the date of commencement of the rental can be counted as tax deductible costs, it is important to determine whether such expenses are needed in the scope of the rental and whether they are related to this activity or are related to this activity. personal character.
In principle, there is no legal provision forbidding the taxpayer to include in the costs an expense incurred to purchase an asset incurred before the commencement of the lease. However, it should be remembered that both the documentation of the incurred expenditure and the obligation to prove the link with the rental income obtained rests with the taxpayer.
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The taxpayer earning the rental income purchased a dishwasher, the value of which was recognized as tax deductible. During the tax inspection, it turned out that the rented apartment already had a dishwasher. The taxpayer installed the newly purchased equipment in his private apartment, arguing that he had bought a dishwasher "just in case the first one broke down". Such argumentation will be insufficient for the tax authority. The taxpayer has not shown a sufficient cause-and-effect relationship between the incurred expenditure and the generated income, and the authority will classify the expenditure as incurred for personal purposes.
Expenses incurred before the commencement of the lease, but related to the income obtained later, constitute tax deductible expenses for the taxpayer.
Purchase of apartment equipment before the start of the lease - the moment of recognizing the expense in tax costs
We already know which equipment components can be directly included in tax costs. Now it is necessary to clarify in which billing period this may occur.
Pursuant to the general rule expressed in Art. 22 sec. 4 of the PIT Act, tax deductible costs are deducted only in the tax year in which they were incurred (subject to exceptions for taxpayers keeping a tax book of revenues and expenses).
Therefore, does this content of the provision mean that the expenditure incurred for the purchase of home furnishings in the year preceding the year of the commencement of the lease will not constitute a tax cost?
In order to answer this question, let's go back to the content of Art. 22d paragraph. 1 of the PIT Act. The final wording of this provision indicates that: "the expenses incurred for their purchase are then tax deductible costs in the month they are put into use". This means, therefore, that the taxpayer recognizes the cost not in the month of incurring the expense, but in the month of putting the equipment into use.
The taxpayer intends to start renting his private apartment from June 2021. In May 2021, he purchased a TV set worth PLN 3,000, a washing machine worth PLN 2,000 and a dishwasher worth PLN 2,500. Due to the fact that the value of each component is less than PLN 10,000, the expenditure may be included directly in the costs. At the same time, it will take place in the month they are put into use, i.e. in the settlement for June 2021.
Expenditure on equipment with a value below PLN 10,000 is tax-deductible in the month it is put into use.
Moving on to the summary and at the same time to the answer to the question posed in the title of the question, let us point out that the expenses for the purchase of home furnishings incurred before the start of the lease may constitute a tax cost, but several conditions must be met.
First, it must be an expense closely related to the rental income. Secondly, it cannot be an expense indicating the fulfillment of the taxpayer's private needs. Thirdly, it is important for the taxpayer to be able to properly document the amount of the expense incurred. Fourthly, it should be remembered that this type of expense is a one-off and direct cost on the date when the equipment is put into use.