Activities in your own apartment - billing problems


Quite often, taxpayers decide to operate in their own apartment. An entrepreneur who wants to include expenses related to the operation of such real estate as tax deductible costs must prove the relationship of these expenses with the conducted business activity and prove the lack of personal character. What expenses incurred for operating in your own apartment can be counted as costs? We explain.

Activity in one's own apartment and the position of tax authorities

It should be borne in mind that in the case of conducting business in the place of residence, each expenditure will be carefully considered by the tax authority in terms of whether it is justified to classify it as tax deductible costs.

The Director of the Tax Chamber in Katowice, in an individual ruling of December 17, 2012 (reference number IBPBI / 1 / 415-1164 / 12 / BK), indicated that the taxpayer has the right to include expenses for the maintenance and operation of an apartment as operating costs, provided that part of the property will be used exclusively for business purposes. The room (or several rooms) separated by the entrepreneur cannot be used for private purposes:

(...) Only in the case when the premises owned by the taxpayer, as a whole or a room separated in this premises, serves only and exclusively for the purposes of business activity and at the same time does not serve personal purposes, there are no obstacles to include expenses related to its maintenance and operation to tax deductible costs (...).

The regulations do not contain clear and legible rules allowing for the proper allocation of expenses, and therefore the taxpayer in such a situation takes a kind of risk. The positions of the tax authorities can be extremely strict.

Taking into account the position of the tax authorities, an entrepreneur who is not able to separate a room intended solely for business purposes will not have the right to recognize the expenses incurred for the maintenance of the apartment in tax deductible costs. Therefore, if the taxpayer uses the premises mainly for private purposes and only additionally for business purposes, then the above-mentioned expenses should be considered private.

When running a business in his own apartment, the taxpayer incurs numerous expenses which, under certain conditions, may be classified as tax deductible costs. Such expenses include, among others: depreciation, costs of utilities and telecommunications services or interest on a loan for an apartment.

Activity in one's own apartment and depreciation

A taxpayer who conducts business in his own apartment or house may make depreciation write-offs for that part of the property that he uses for business purposes. The basis for depreciation is the proportionally calculated initial value of the apartment, determined according to the general rules:

  • in the case of a purchase, it is the purchase price of the flat,

  • in the case of self-production, it is the production cost.

It should be remembered that in order to depreciate a given part of the apartment, it must be classified as the company's fixed assets.

Example 1.

Ms Anna runs a sole proprietorship. She privately purchased an apartment with an area of ​​60 m2. A year after the acquisition, she decided to operate in her own apartment. It has allocated an area of ​​30 m2 for this purpose. It decided to introduce this part of the property into fixed assets. In order to make depreciation write-offs, start by calculating the percentage of the area intended for business purposes (30/60 * 100% = 50%). The purchase price was PLN 400,000. Thus, the initial value of the fixed asset is: 50% * PLN 400,000 = PLN 200,000.

Purchase of equipment

Working in your own apartment is often associated with the acquisition of equipment. If the expenditure is intended for business purposes and meets the definition of a tax deductible cost, it may be recognized as an expense.

Art. 22 sec. 1 of the PIT Act

Tax deductible costs are costs incurred in order to achieve income or to maintain or secure the source of income, with the exception of the costs referred to in article 1. 23.

The costs of purchasing home furnishings, e.g. furniture, desks, chairs, can be included in the costs in two ways:

  • directly into costs,

  • through depreciation write-offs.

However, in the case of purchasing equipment with a value of up to PLN 3,500, there are three options for including them in operating costs:

  • directly to tax deductible costs,

  • classifying a given item as fixed assets and making a one-off depreciation write-off,

  • classifying a given item as fixed assets and depreciation.

It is up to the taxpayer to decide how to count the purchased equipment as costs. Only in the case of purchase of goods with a value exceeding PLN 3,500, it is only possible to make depreciation write-offs.

Interest on a mortgage and business in your own apartment

It very often happens that a taxpayer owns an apartment for which a mortgage has been taken out. Interest on such a loan can be classified as tax deductible costs:

  • in full amount if the apartment is used solely for business purposes,

  • in an appropriate proportion corresponding to the percentage share of the area used solely for business purposes to the total flat area.

The taxpayer must additionally remember that only the interest paid on the loan taken may become a tax expense. On the other hand, the interest accrued until the day the flat is accepted into the fixed assets register will increase its initial value.

Expenses for rent and utilities

A factor may be appropriate in the case of rent payments. The amount that may constitute a tax cost will be possible to determine by calculating the percentage share of the part of the apartment used exclusively for business purposes in the total area of ​​the apartment.

Another solution in this case may be to establish a separate meter or to prepare appropriate documentation in which the calculation method will be presented (one that takes into account many factors).

Example 2.

Mr. Piotr's apartment has a total of 50m2. The area of ​​the apartment, which is used exclusively for business purposes, is 20m2. The entrepreneur received a rent bill in the amount of PLN 200. An entrepreneur, in order to distinguish expenses constituting a tax cost, must make the following calculations:

  • 20/50 * 100% = 40% - the percentage of the area used for business purposes in relation to the entire flat area,

  • 40% * PLN 200 = PLN 80 - expenses that can be included in tax costs.

Internet and telephone expenses

Operating in your own apartment can also cause difficulties in separating the expenses for telephone and internet. Both in the case of charges for telephone calls and Internet use, the most reliable solution will be to sign a separate contract for business data. Such a solution will allow for safe recognition of the entire subscription fee in the costs, as the taxpayer is able to prove that these expenses are a company's expense.

In the case of telephone calls, the entrepreneur may also use the option of obtaining a bill from the network operator, on the basis of which the calls made as part of the business activity will be listed. Then only business calls can be included in the costs. Confirmation such as billing should be kept as company records.

Activities in your own apartment - real estate tax

A taxpayer who has decided to conduct business in his own apartment is obliged to report this fact to the city or commune office. Such action is aimed at determining whether the apartment will be converted into a commercial property. The property tax rate depends on the decision of the commune.

Real estate tax can be classified as tax deductible costs at the time of issuing the decision by the tax authority. A document in the form of a decision may be considered an accounting document - on its basis, an expense can be booked. As a rule, the tax should be included in the costs, taking into account the percentage of space used exclusively for business purposes.

How to book the costs related to running a business in an apartment in the system?

In order to enter in the system the expenses that result from the use of the ratio (eg rent or interest on a loan), go to the tab: EXPENDITURE »EXPENDITURE» ADD »INTERNAL EVIDENCE» Accounting scheme: Costs of running a business. A document confirming the expenditure should be attached to the printed CC. It is recommended to include the calculations on the document.

In the case of invoices for the Internet or telephone, the taxpayer may decide to sign a separate contract for the company. In such a case, when all expenses were incurred in connection with the conducted activity, the booking is made using the path: EXPENDITURE »EXPENDITURE» ADD »VAT INVOICE» Type of expenditure: Costs of utilities and telecommunications services.