In the annual settlement for 2024 taxpayers can once again take advantage of the thermo modernization relief.
What is the relief about?
The thermo modernization relief, regulated in art. 26h of the Personal Income Tax Act, gives the opportunity to owners/ co-owners of a single-family residential building - who pays PIT on general rules, in the form of a flat tax or a lump sum on recorded revenues - of the deduction from the tax base of expenses incurred in the tax year for building materials, equipment and services related to the implementation of the thermo modernization project.
The total amount of the deduction cannot exceed PLN 53,000 PLN in relation to all implemented thermo-modernization projects in individual buildings, of which the taxpayer is the owner or co-owner.
The allowance limit is not related to one investment or one thermo modernization project, but assigned to a given taxpayer, regardless of the number of investments. In the case of spouses, it applies to each of them separately (each is entitled to a maximum deduction of PLN 53,000).
What can be deducted?
The deduction is mainly made of expenses for the purchase of building materials related to thermal modernization projects. In practice, these are most often expenses for windows and doors as well as for materials used to insulate buildings and replacement of the heating system. Expenses related to the purchase of photovoltaic devices as well as gas and electric boilers also entitle the deduction.
A detailed list of types of building materials, equipment and services related to the implementation of thermo modernization projects is specified in the Regulation of the Minister of Investment and Development of December 21, 2018 (Journal of Laws of 2018, item 2489).
Terms of using the deduction
The following are considered a thermo modernization project:
- Improvement of the building, which reduces the energy demand for heating buildings or domestic hot water;
- Improvement of the building, as a result of which there is a reduction of energy losses in local heating networks and the heat sources, supplying them;
- Elimination of local heat source and execution of a connection to a centralized source, resulting in cost reduction;
- Total or partial replacement of energy sources with renewable or cogeneration sources, i.e. those generating electricity and heat simultaneously.
The thermo modernization project must be completed in 3 consecutive years, counting from the end of the tax year in which the first expenditure was incurred. If this deadline is not met, the taxpayer is obliged to return the tax credit by adding the amounts previously deducted to the income for the year in which the 3-year period expired. If the first expense is incurred in 2024, the investment should be completed by the end of 2027.
The deduction is made in the return for the tax year in which the expenses were incurred. The deduction amount not covered by the taxpayer’s annual income/revenue is deductible in subsequent years, but no longer than for 6 years from the end of the tax year in which the first expenditure was incurred.
Expenses taken into account by the taxpayer in connection with the use of other tax reliefs are not deductible (e.g. when the same expense was settled under the so-called housing relief, consisting in exemption from PIT of income from the sale of real estate).
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