Tax relief for working seniors – not every pensioner can benefit from the tax preference
– The exemption of income up to PLN 85,528 applies to taxpayers who have reached retirement age but, on the date the income is received, are not receiving a pension, family pension or other benefits specified by law. To determine whether a given income is covered by the tax exemption, we must therefore analyze the time of its payment—that is, whether it was paid before the pension was obtained or only after we had received a benefit from ZUS – points out Monika Piątkowska – a tax adviser at e-pity.pl.
A common dilemma faced by working seniors is whether, for example, they can cover a retirement severance payment with the tax relief for working seniors and not pay income tax on it. – In such cases, the title of the income received is not important to the tax authorities. What matters is when the funds are received. This position has repeatedly been emphasized in interpretations issued by the Director of KIS (e.g. the individual interpretation of the Director of the National Tax Information dated 28 December 2023, 0115-KDIT2.4011.479.2023.2.ŁS; the individual interpretation of the Director of the National Tax Information dated 27 February 2025, 0115-KDIT2.4011.626.2024.2.ŁS). The tax authorities consistently maintain that income is exempt from taxation if it was paid before the date of payment of the first pension. Therefore, the key date is the day the first benefit from ZUS is received. Future pensioners who plan to retire while also wishing to benefit from the tax exemption, for example on funds received as part of a retirement severance payment, must ensure that these funds are transferred to them before the date they receive their first pension – advises Monika Piątkowska of e-pity.pl.
Seniors should also remember that not all income is covered by the relief. The law provides that income exempt from taxation includes income from employment, contracts of mandate, maternity benefits, and business activity taxed according to the tax scale, the flat-rate tax and the lump-sum tax on registered income, provided that the taxpayer is subject, in respect of earning this income, to social insurance within the meaning of the Social Insurance System Act. The relief does not apply, however, to income from, for example, sickness benefits, a contract for specific work or copyrights. Taxpayers who earn income under a management contract or receive rental income will also not benefit from this preference.
Another problem faced by working seniors is the possibility of deducting social insurance contributions. – Contributions paid on income covered by the exemption are not deductible. It may therefore be problematic to assign contributions to taxable and exempt income, especially since the relief applies from the date retirement age is reached. Working pensioners should therefore analyze which contributions were paid on income earned up to their birthday and which after that date. Such a taxpayer should also check whether they exceeded the amount covered by the exemption during the year. If the income turns out to be higher than the relief limit, the senior is entitled to include the social contributions relating to the excess in their tax return as well – emphasizes Monika Piątkowska.
Despite the difficulties mentioned, working seniors should not give up the preference intended for them. Although this relief can sometimes be problematic to settle, it is undoubtedly also highly beneficial.