Tax‑deductible costs: what they are and how to apply them

Tax‑deductible costs (KUP) reduce the taxable base. In practice, it means tax is calculated on a lower amount. The key is the income type and proper documentation.

Use the KUP calculator for a quick estimate.

Cost of earning income — what it is and why it matters

KUP are costs that can be deducted from income. Depending on the source, they can be:

• fixed (employee‑type costs),
• percentage‑based (e.g., 20% for some civil contracts),
• copyright‑related 50% (for specific creative income).

Not every income qualifies in the same way, so start by identifying the source and mode.

Tax‑deductible costs — how to calculate (most common modes)

• Employee costs — fixed, dependent on circumstances such as place of work.
• 20% costs — often applied to civil contracts if conditions are met.
• 50% costs — apply to copyright‑related income and require documentation.

See details in dedicated guides: increased costs, 50% KUP and KUP by contract type.

KUP and self‑employment

For business activity, KUP is handled differently than for employment. Instead of fixed costs, you use actual expenses linked to income. This gives flexibility but requires stronger documentation. The chosen tax regime also affects how costs are settled.

When KUP do not apply or are limited

Not every income qualifies. Restrictions can result from contract type, missing documents or unmet statutory conditions. If unsure, use a conservative approach and correct after verification.

KUP limits and annual caps

Many modes have annual limits. The exact amounts are statutory and can change. If you have multiple income sources or contracts, check how limits combine within the year. See: KUP limits.

Documents and formalities

Typically required:

• contracts and documents proving income source,
• evidence that you meet the conditions for a given mode (e.g., copyright),
• commuting or residence confirmations for increased costs.

The better documented the basis, the lower the risk of corrections.

Illustrative example

Assume you apply a percentage KUP. Costs reduce the taxable base, so tax is calculated on the amount “after KUP.” In practice, it pays to compare variants and check whether the annual limit is reached. The calculator helps with scenarios.

Common mistakes

• selecting the wrong KUP mode,
• missing documentation for 50% costs,
• ignoring annual limits,
• inconsistencies between PIT and source documents.

Checklist before filing

• identify the income source and correct KUP mode,
• verify the limits for the year,
• collect documents supporting the costs,
• compare scenarios in the calculator,
• ensure PIT data are consistent.

Changes during the year

Changing jobs, place of residence or contract type can affect KUP. In such cases, update your statements with the payer and verify that annual limits are not exceeded. It helps avoid corrections in the annual return.

KUP in PIT returns

KUP is shown in PIT based on payer information or your own records. Learn where and how it appears: KUP in PIT.

Non‑deductible expenses

Not every expense qualifies as KUP. In practice, costs unrelated to income, undocumented or excluded by law should not be included. If unsure, use a conservative approach.

Cost of earning income from two employment contracts

With two employment contracts, each payer applies costs separately, but the annual cap is shared. Track the total in PIT and correct the return if the limit is exceeded.

Sources

• PIT Act — tax‑deductible costs (ISAP)
• podatki.gov.pl — PIT
• gov.pl — Ministry of Finance