Tax privileges for real estate sales in Poland: what You need to know about garages

The topic of tax privileges for real estate sales continues to raise numerous questions, particularly regarding expenses related to purchasing or renovating garages. While I’ve addressed this subject before, one key nuance regarding the taxation of profits from selling a garage requires further explanation.
Let’s revisit this aspect and clarify it in detail)

General Rules for Real Estate Sales Taxation
The sale of real estate is generally subject to tax if conducted within five years of purchase. This rule is established under the Personal Income Tax Act (PIT). However, you can avoid taxation if the proceeds from the sale are allocated to your personal housing needs within three years from the end of the year in which the sale took place.

The list of eligible housing purposes is extensive and includes expenses related to construction, expansion, superstructure, remodeling, or renovation of your residential house, a part of it, or your residential apartment.However, when it comes to garages, the law and tax practice present certain nuances.

How the Legal Status of a Garage Affects Tax Privileges
One key factor is how the garage is legally classified.
• Garages as Part of Shared Property:
If the garage is part of the shared property of a building, such as an underground parking space, tax authorities often consider expenses for its purchase or renovation as eligible for tax relief. According to the Property Ownership Act, the owner of an apartment also owns a proportional share of the shared property. Thus, buying an apartment with a garage that is legally part of the shared area, or spending on its renovation, can qualify as housing-related expenses exempt from taxation.
• Garages with Separate Land Registry:
Challenges arise when the garage is registered under a separate land registry (księga wieczysta). In such cases, tax authorities typically do not recognize these expenses as housing-related. This distinction can disqualify taxpayers from receiving tax relief, even if the garage is used exclusively for personal purposes.

Example of Tax Authority Interpretation
An illustrative case is the explanation provided by the Director of the National Tax Information Office on October 12, 2020 (No. 0115-KDIT2.4011.533.2020.2.MM). In this instance, it was confirmed that a taxpayer had the right to tax relief for purchasing an apartment with a utility room and a garage that were part of an underground parking area.

Legal and tax experts advocate for equal treatment of all types of garages, regardless of their inclusion in a shared property or separate land registry. They argue that a garage, regardless of its legal classification, is often an integral part of housing and should qualify for tax privileges on equal terms.

If You plan to sell real estate and use the proceeds to buy housing with a garage, it’s crucial to verify the legal status of the garage beforehand.

Whether the garage is part of shared property or listed under a separate land registry will determine Your eligibility for tax relief.

If You have further questions or need professional help navigating tax matters, feel free to reach out. I’m here to assist You every step of the way.