Lump-Sum Expenses vs. Actual Costs – Which Is More Profitable for Rental Income?
Every landlord eventually faces the question: choose the simplicity and certainty of lump-sum expenses, or keep detailed records and claim actual costs? At first glance, it might seem like a minor detail, but in reality, this decision can determine how much tax you pay – or how much money stays in your pocket.
This article is part of the large guide to lease agreements, where you can find more practical topics related to renting apartments, houses, and commercial spaces: read more
“I have a rental apartment – should I claim the lump-sum?” “Is it worth keeping receipts for repairs?” “What if I have a mortgage?” – these are the questions I get from clients. People also search for phrases like “rental lump-sum expenses,” “actual costs rental,” or “how to reduce rental income tax.” The rules seem simple on paper, but in practice, the situation is often more complicated.
What You Will Learn in This Article
How lump-sum expenses work for rental income
How to claim actual costs and what qualifies
When a lump-sum is beneficial and when it’s not
Common mistakes landlords make when choosing the method
Expert Explanation
Income from rental property under Section 9 of the Income Tax Act can be reduced in two ways:
Lump-sum expenses – 30% of rental income, capped at CZK 600,000 per year. You don’t need to provide any receipts or invoices. It’s quick, simple, and involves minimal paperwork.
Actual costs – you deduct real expenses related to the rental, such as repairs and maintenance, property insurance, property tax, depreciation, service charges linked to the rental, mortgage interest, or real estate agent commissions.
The right choice depends on the amount and structure of your expenses. If your costs are high (e.g., significant repairs or mortgage payments), claiming actual costs may save you more, as they can exceed 30% of income. Conversely, if you rent out a property in good condition without major investments, the lump-sum is often more advantageous.
The decision cannot be changed mid-year – you choose the method when filing your tax return, and it applies to the whole year. It’s also crucial to correctly allocate expenses to rental income to withstand a possible tax office audit.
Real-Life Example
An apartment owner in Prague earned CZK 240,000 in annual rental income. He claimed the 30% lump-sum, i.e., CZK 72,000. After consultation, it turned out that his actual expenses (mortgage interest, insurance, bathroom renovation) totaled CZK 115,000. The difference in the tax base exceeded CZK 40,000 – meaning he paid several thousand crowns in unnecessary taxes.
You Might Be Thinking…
“I’ll just go with actual costs every time.” Be careful – the administrative workload, the need to store receipts, and the risk of having some expenses disallowed can outweigh the benefits for smaller rentals.
Lawyer’s Recommendation
Before deciding, I recommend making a simple calculation of both options – ideally with a tax professional. This is the only way to see what is truly beneficial for you and avoid unpleasant surprises during a tax inspection.
Do you want to make sure you pay only as much tax on your rental income as necessary – and not a crown more? Contact me, and we’ll find the most advantageous taxation option for you.
Contact a legal professional – I specialize in contract law.
Learn more here.
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- Naposledy aktualizováno: 10/08/2025
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Lump-Sum Expenses vs. Actual Costs – Which Is More Profitable for Rental Income?
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