Author: Szymon Starnawski / Grupa Murator Even if pensions are not formally excluded from income subject to PIT, from 2024 the tax may in practice cover a narrow margin of the best-off financially seniors
Pensioners should not pay PIT, i.e. income tax – such opinions have been expressed by both the interested parties and experts for years. Almost two years ago, major changes took place in the taxation of pensions, and further changes are now announced before the elections. Will pensions be tax-free and from when?
Contents
Pension tax 2023: who doesn’t pay tax now?Pension tax 2024: will there be an income tax exemption?Pensions 2024: who will gain how much from PIT exemption?
From a formal point of view, there is no project to exempt pensions as a specific category of income from personal income tax – PIT. However, there is an announcement to increase the tax-free amount to PLN 60,000. PLN per year. In practice, this means PIT exemption of over 90%. retirees, which in turn means an increase in take-home pensions from January by up to PLN 300 per month, without any formal increase.
Pension tax 2023: who doesn’t pay tax now?
The changes known as the Polish Order have meant that more than half of pensioners will retire from 2021 does not pay PIT income tax, though formally, pensions remain income from which ZUS calculates and possibly collects a tax advance when paying the benefit.
This is an effect increasing the tax-free amount to PLN 30,000. This means that ZUS determines the PIT advance only when the pension is higher than PLN 2,500 – lower benefits are tax-free.
Unfortunately, this does not mean that the retiree receives the entire pension amount up to PLN 2,500. Regardless of the height, it is reduced o 9 proc. for health insurance contributions.
This method of collecting this contribution largely eliminated the effect of tax exemption – through the high PIT tax allowance – for the lowest pensions. Before the changes, the tax-free amount was much smaller, but 7.75%. health insurance contributions were tax deductible, which in practice meant that the gross pension was charged with a health insurance contribution of 1.25%.
It is true that the basic tax rate was reduced from 17 to 12 percent, but gross and net pensions still differ significantly.
Pension tax 2024: will there be an income tax exemption?
Unfortunately, this is not likely to happen – pensions are still supposed to be income, which is, in principle, subject to personal income tax. However, several groups announce that the tax-free amount will be increased from January 1, 2024 to PLN 60,000.
If this happens, in practice without tax – and only still with health insurance contributions – there will be pensions up to PLN 5,000.
This means the same benefits related to the tax-free amount as during the first two years of the reform (only from pensioners’ benefits up to PLN 2,500). With a higher tax-free amount, pensions will also be tax-free for those retirees whose pension is currently within the limits PLN 2,501 – PLN 5,000.
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Author: zbiskupski Pensions currently and after a possible increase in the free allowance from 2024 – sample calculations Link: Click and enlarge
Pensions 2024: who will gain how much from PIT exemption?
If there is an increase in the personal income tax free amount – PIT, from January 1, 2024 from PLN 30,000 to PLN 60,000, Even before the March indexation of pensions, the pensions of people from whom ZUS now deducts advance tax payments will automatically increase.
These are pensions ranging from PLN 2,501 a month to PLN 5,000 a month. Pensioners who now receive benefits in this amount will automatically receive from January 2024 more from PLN 1 to PLN 300.
Those who have higher pensions will also benefit from the change – because the higher tax-free amount applies to everyone who pays PIT calculated from the table.
People receiving pensions from PLN 5,001 and up will thus receive a “raise” (a higher pension in hand) by as much as PLN 300 per month.
How much exactly? We have calculated on selected examples in the table above.
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2023-10-13 19:56:32
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