In 2023, the limit for health insurance deduction increased. It applies to taxpayers who chose a flat tax as a form of PIT settlement. They can no longer include PLN 8,700 but PLN 10,200 as tax-deductible costs or deduct it from their income. What do these amounts come from and what real benefit will it bring to taxpayers?
Health insurance deduction limit – legal basis
The amount of the deduction limit itself was set by the Ministry of Finance in the Notice of the Minister of Finance of December 12, 2022 on the amount of health insurance contributions included in tax-deductible costs or deducted from income in 2023.
The legal basis for deducting health insurance contributions is Art. 30c section 2 of the Personal Income Tax Act, according to which:
The basis for calculating the tax referred to in section 1, is the income determined in accordance with Art. (…). Taxpayers may reduce this income by:
1) (…);
2) health insurance premiums paid in the tax year pursuant to the Act of August 27, 2004 on health care services financed from public funds:
a) for non-agricultural economic activities taxed in accordance with paragraph 1,
b) (…)
however, the total amount of these contributions classified as tax-deductible costs or deducted from income may not exceed PLN 10,200 in a tax year;
Health insurance deduction limit – what is the real benefit?
In the context of the current (post-“New Polish Deal”) situation, the change should be treated positively. However, we must remember that this provision will only be used by those who will actually pay more than PLN 8,700 in health insurance contributions in 2023. Therefore, not every taxpayer who has chosen the “straight line” option will benefit.
It is worth noting that the amount of the health insurance premium paid can either be (i) included in tax-deductible costs, or (ii) deducted from income. By choosing (i) solution, we reduce both the PIT liability and the health insurance contribution (i.e. 19% + 4.9% = 23.9%). However, by choosing solution (ii), we only gain PIT (i.e. 19%).
Higher limit for deducting health insurance contributions – example
Let’s assume that the taxpayer will pay PLN 10,200 in health insurance contributions in 2023 and (I) include this amount “as costs”. Since the limit increases by PLN 1,500, the approximate profit of such a taxpayer will be approximately PLN 360 per year. This is due to the fact that PLN 1,500 x 23.9% = approx. PLN 360. This is the maximum profit – due to the limit, he will not be able to “deduct” any more.
If the same taxpayer (II) deducts the contribution from income, he will only gain PLN 285 per year (PLN 1,500 x 19%).
The limit increase is good news! However, for a taxpayer who pays approx. PLN 10,000 a year PLN as health insurance contribution to ZUS, this change will not be clearly noticeable.
Of course, the possibility of deduction itself is one of the components that should be taken into account when choosing the form of taxation. Let’s not forget about this!
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