The relief for the middle class introduced as part of the tax changes from the Polish Order raises doubts. As the consulting company EY pointed out, it is particularly visible in the joint settlement of spouses.
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EY presented the key changes in the Polish Order that are important for the joint settlement of spouses. It goes, among others for an increase to 120,000 PLN in the amount of annual income to which the 17% rate applies.
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In addition – after the changes – joint settlement with the spouse is also allowed for the year in which the marriage was concluded, provided that they remained in it until the end of the year. “This means that even if the taxpayers got married on December 31, 2021, they will also be entitled to joint tax returns. In the event of divorce, taxpayers will not be entitled to joint tax returns for the months of being married. This change will apply to tax returns for 2022. year “- we read.
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As tax experts pointed out, joint settlement with a spouse is possible in the year of death of one of the spouses. In addition, it was indicated that spouses settling jointly will be able to settle the so-called tax relief for 4 plus families, however, this change will only apply in the annual settlement submitted in 2023. Additionally, spouses filing jointly filings may take advantage of the middle class tax relief.
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Polish Order – relief for the middle class
The allowance for the middle class is to be a way to compensate a large group of employees for the negative effects of changes in the health contribution introduced by the Polish Government. Until now, the health insurance premium was 9 percent. salary (after deducting the amount of contributions for retirement, disability and sickness insurance), but 7.75%. part of the contribution was tax deductible. The Act abolished this deduction.
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The condition for taking advantage of the tax relief is annual income in the range from PLN 68,412 to PLN 133,692. This means a salary of a level from PLN 5,701 to PLN 11,141 gross per month.
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According to EY, the relief for the middle class raises the most doubts in the regulations introduced as part of the Polish Order. “Taxpayers do not know, for example, whether they are entitled to it in a situation where one of the spouses has revenues of PLN 50,000 per year, and the other of PLN 150,000” – indicated the experts.
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As explained, in the analyzed situation, one taxpayer is not entitled to a middle-class tax credit because his income is too low, while the other taxpayer is too high. “However, in the case of spouses, there is an alternative solution (as a right, not an obligation) – they can add up their income, which may be beneficial for them,” EY suggests.
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Relief for the middle class and the joint settlement of the spouses
To this end, each taxpayer should separately reduce “his income by costs (tax deductible costs, social security contributions, middle class relief – if applicable) and other deductions he is entitled to”. Then the spouses add up their income, which should be divided into two, and the resulting value is multiplied by the tax rate according to the scale and reduced by the tax-reducing amount (PIT-2). The final result is the input tax which, after deducting the sum of advances made to the tax office during the year, will show overpayment or underpayment of income tax.
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In EY’s opinion, “the current changes have introduced a kind of alternative choice.” “Spouses planning a joint settlement in the next calendar year should analyze whether the joint settlement will be beneficial for them, or whether it may be more attractive to settle the tax relief individually (individually). It may happen that preparing the annual tax return separately will bring more benefits, as the amount of deductible allowance for the middle class will be higher than the allowance for aggregate income “- explained.
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EY in the publication cites some examples. In one of them, one of the spouses has revenues of PLN 15,000. PLN per month, and the second one does not achieve any income. According to the interpretation of the Ministry of Finance, the tax relief for the middle class may be used in this case with joint settlement and this solution will be more tax-beneficial.
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In another example, one spouse has a monthly income of $ 6,000. PLN, and the second earns just above the minimum wage – 3.1 thousand. zloty. In this situation, individual settlement will be more advantageous, as the total income will be too low to benefit from the middle-class tax relief.
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According to experts, joint settlement of spouses is attractive especially when there is a large disproportion of income, because then we are able to consume two reliefs.
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photo-source">Main photo source: Shutterstock
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