Deduction of health insurance contribution from income tax
Pursuant to Art. 27b of the Personal Income Tax Act, the health insurance contribution is deductible from income tax. This applies to both people running a business and those who are employees. Currently, the health insurance contribution amounts to 9% of the calculation basis, however, it is not fully deductible. Only 7.75% of the basis of assessment is deductible, and the remaining 1.25%, not deductible from tax or income, is also not a tax deductible cost. Let's check how the deduction of health insurance should proceed by entrepreneurs and employees?
Deduction of health insurance contributions by employees
In the case of employed persons - employees, contributions are paid by the payer, e.g. the employer, who shows their amount in PIT-11 transferred to employees. This amount is charged in full to the employee and will be deducted from his gross wage.
The amount of contributions collected by the payer, shown in PIT-11, is limited to 7.75% of the basis of assessment and is fully tax deductible. To deduct this amount, it should be included in the annual tax return.
Deduction of health insurance contributions in the annual tax return - brochure KIS.pdf Description: form for manual completion
Deduction of the health insurance contribution by the entrepreneur
Self-employed persons may also deduct from income tax contributions for their own health insurance in the amount of 7.75% of the calculation basis, provided that they have been paid. Please note that it is not possible to deduct any due but unpaid health contribution from the tax. The remaining part of the premium, as mentioned above, is neither deductible nor tax deductible. Health contributions paid for employees are also not subject to deduction, as the entrepreneur does not finance them, but only their payer, i.e. they are collected from the employee's remuneration and transferred to the Social Insurance Institution.
The deduction of the health insurance contribution from the tax can be made both by an entrepreneur who settles accounts on general terms and by a tax card, flat tax and registered lump sum. The right to deduct are documents confirming the payment of health insurance contributions in a given accounting year.
An entrepreneur who pays for himself health insurance contributions, makes deductions on an ongoing basis by reducing the advance on income tax in the month / quarter in which these contributions were paid.
If the sum of these contributions exceeds the amount of tax for a given period, the non-deducted part of the contributions may be deducted in subsequent accounting periods, but not later than until the submission of the annual tax return. In addition, the sum of deductible contributions for the entire year is shown collectively in the annual tax settlement. Health insurance contributions can also be deducted from taxes from other income, not only from business activity, but also from e.g. employment relationship. It is possible, for example, when the enterprise makes a loss or its income is so low that the amount of tax on activity does not allow for the deduction of all contributions.
However, it is not possible to deduct the contributions paid in a given year in the next year, even if due to low tax or loss, they could not be deducted in the year of payment. The right to deduct health insurance contributions does not apply to the following years.
Mr. Aleksander in 2019 obtained a loss on his business. Social contributions were settled directly in tax costs, while health contributions were included in the calculation of the income tax advance. Are ZUS premiums paid in 2019 forfeited due to the loss achieved?
In a situation where social contributions were recognized directly in tax costs, the occurrence of a loss will not result in their loss, as these contributions will increase the loss obtained. Mr. Aleksander will be able to settle the loss from previous years in the following years. On the other hand, the deduction of the health insurance premium takes place only in the advance for the income tax and thus it is not possible to recognize these social security contributions directly in the tax deductible costs. Therefore, the tax loss will result in the loss of the possibility of deducting health contributions because they cannot be accounted for in subsequent years. Since health insurance premiums are deductible in the year in which they were paid, and not in the year they relate to, it is possible to deduct overdue premiums. Thus, when contributions for previous years are settled, they are deductible in the year of their actual payment. Example 2.
In January 2020, Mr. Łukasz settled the outstanding health insurance contributions for September and October 2019. Can the deduction of the health insurance contribution take place in 2020 or is Mr. Łukasz obliged to include the contributions paid in the year to which they relate, i.e. in the annual tax return for 2019?
Deduction of the health insurance contribution is possible in the period in which these contributions were actually paid, regardless of the period to which they relate. This means that Mr. Łukasz can make a deduction at the earliest in the calculation of the advance income tax for January 2020.
Start a free 30-day trial period with no strings attached!
Deduction of the health insurance contribution in the wfirma.pl system
In the wfirma.pl system, the deduction of the health insurance premium in the generated advance tax is made automatically after the settlement of the ZUS DRA form. To do this, go to the tab: START »ZUS» SETTLEMENT DECLARATIONS, select the ZUS DRA form on the list and select the option SETTLEMENT from the top menu.
Thanks to this, all ZUS contributions (social, health and labor fund) will be automatically included in the relevant records and calculations.
More information on booking ZUS contributions in the wfirma.pl system can be found in the article: Posting ZUS contributions