Property rental taxes: The complete guide for 2025

Rental property is a great source of passive income, but with it comes the obligation to pay taxes correctly. Many landlords lose thousands of crowns a year due to ignorance of tax rules, unused deductions or incorrectly filled out returns. In this guide, we will explain step by step how to properly tax rental income in 2025, what expenses you can deduct and how to avoid fines from the tax authority.

Basic overview: What you must tax

Rental income as § 9 of the Income Tax Act

Income from renting real estate in the Czech Republic is taxed according to § 9 of Act no. 586/1992 Coll., on income taxes. This is a separate category of income that includes:

• Rent from apartments and houses
• Rent from non-residential premises (offices, warehouses, garages)
• Rent from land
• Income from subletting (if you are a tenant yourself)

What counts as income

Taxable rental income includes all payments from the tenant will receive as rent. However, advances for services (electricity, water, heat, waste) are not included if you re-invoice them to suppliers in the original amount.

Attention: If the tenant pays for repairs or investments in real estate instead of rent, this is non-monetary income that you must also tax.

When you do not have to file a return

Whether a return is required depends on the taxpayer, other income, tax year and current Czech threshold; verify Financial Administration guidance.

Income tax rates in 2025

Progressive taxation

From 2024, two personal income tax rates apply in the Czech Republic:

• Use the tax rate and threshold applicable to the relevant Czech tax year and tax base; verify the current Financial Administration guidance.
• Use the tax rate and threshold applicable to the relevant Czech tax year and tax base; verify the current Financial Administration guidance.

Practical impact for landlords

Do not assume a single rate for all landlords; the applicable rate depends on the relevant tax year and the taxpayer's total tax base.

The tax base is Kč 151,200. Apply the rate, allowances and credits applicable for the relevant Czech tax year; the numerical result is illustrative only.

Flat-rate expenses vs. actual expenses

Illustrative flat-expense method

For rental income, verify the percentage and cap applicable under current Czech tax rules; do not treat a fixed cap as universal.

Advantages of flat-rate expenses:

• You don't have to record individual expenses
• You don't have to hide receipts and invoices
• Simple calculation
• Less administration

Disadvantages:

• If your actual expenses are higher than the applicable flat-expense percentage, you lose money
• You cannot apply real estate depreciation
• You cannot deduct mortgage interest

Example of calculation with a flat rate:

• Annual rental income: 240,000 Kč
• Illustrative flat-expense method: 72,000 Kč
• Tax base: 168,000 Kč
• Tax at the applicable rate for the relevant tax year: Kč 25,200

Actual expenses

If you invest in real estate, pay off a mortgage or have high operating costs, it may be more beneficial to apply actual expenses.

What you can deduct:

• Real estate depreciation (straightforward or accelerated)
• Mortgage interest
• Insurance real estate
• Repairs and maintenance (painting, faucet replacement, roof repair)
• Real estate tax
• Property manager fees
• Rental related travel expenses
• Legal services and accounting
• Advertising and marketing
• Equipment depreciation (furniture, appliances)
• Real estate agent commission

Example calculation with actual expenses:

• Annual rental income: 240,000 Kč
• Property depreciation: 85,000 Kč
• Mortgage interest: 45,000 Kč
• Insurance: 8,000 Kč
• Repairs: 25,000 Kč
• Property tax: 3,500 Kč
• Others: Kč 5,000
• Actual expenses in total: Kč 171,500
• Tax base: Kč 68,500
• Tax at the applicable rate for the relevant tax year: Kč 10,275

In this case, you will save almost Kč 15,000 in tax compared to flat-rate expenses.

How to decide

Flat-rate expenses are paid if:

• The property is paid off (no mortgage interest)
• The property is in good condition (minimal repairs)
• You don't want to keep records of expenses
• Your actual expenses are lower than the applicable flat-expense percentage of your income

Actual expenses are paid if:

• You pay off a mortgage with high interest
• You carry out extensive repairs or renovations
• You have a new property with high depreciation
• Your actual expenses exceed the applicable flat-expense percentage of income

Property depreciation

What is depreciation

Depreciation is the gradual application of the purchase price of the property to expenses. The property is not depreciated all at once, but gradually over its useful life.

Depreciation groups

Residential and non-residential buildings fall into the 5th or 6th depreciation group:

• 5. depreciation group (30 years): residential buildings, apartments
• 6. depreciation group (50 years): office buildings, hotels, shopping centers

Equal vs. accelerated depreciation

Equal depreciation:

• The same amount every year under the applicable depreciation schedule
• Group, first-year percentage and later percentages must be checked under the current tax rules
• Simpler calculation

Accelerated depreciation:

• Higher depreciation in the first years
• They gradually decrease
• Advantageous at the beginning rent

Illustrative example (apartment worth Kč 3,000,000):

• Apply the group, first-year percentage and later percentages applicable under the current tax rules; the figures are not universal

Important rule

You can only apply depreciation for actual expenses, not for flat-rate expenses. Depreciation cannot be applied retroactively for years when you did not apply it.

Deadlines and forms

When to file a return

• Filing deadlines depend on the relevant tax year, filing method and statutory conditions. Check the current Financial Administration guidance before submitting.

What form to use

To declare rental income, use the Individual Income Tax Return (form 25 5405). You fill in the rental income in Appendix No. 2 (income according to § 9).

What you will need

• Overview of rental income for the whole year
• Lease contracts
• Expenses documents (if you apply real)
• Real estate depreciation (depreciation plan)
• Confirmation of mortgage interest payments
• Confirmation of paid real estate tax

Tax advances (check the relevant Czech tax year)

Tax-advance duties and thresholds depend on the applicable Czech tax year and the taxpayer's last liability; verify current Financial Administration guidance.

• The schedule and percentage applicable for the relevant Czech tax year; verify before paying.
• The schedule and percentage applicable for the relevant Czech tax year; verify before paying.

VAT and rent

When to register for VAT

VAT registration depends on the current Czech turnover rules and tax year; do not rely on a fixed 2,000,000 Kč rolling-period summary.

Rent and DPH

• Rent of flats is exempt from VAT (§ 56a of the VAT Act) regardless of whether you are a VAT payer
• Rental of non-residential premises VAT payers can be taxed (21%) if you choose to do so
• Short-term accommodation may be subject to VAT depending on the actual service, taxpayer and current VAT rules; stay length alone is not decisive

Voluntary registration

In some cases voluntary VAT registration may be worthwhile, especially if:

• You rent non-residential premises to VAT payers
• You carry out extensive renovations (entitlement to deduction of VAT from construction works)

Social and health insurance

Rent according to Section 9

Rental income according to Section 9 is generally not subject, but the actual activity and current Czech rules control to social or health insurance. This is a significant advantage compared to income from a trade (Section 7).

Attention to Section 7

If you rent a property as part of your business (e.g. you provide additional services such as cleaning, laundry, breakfast), this is income from a business according to Section 7. In this case:

• Social and health contributions, if applicable, at the rates and bases effective for the relevant Czech tax year; verify with the relevant Czech institutions.
• Social and health contributions, if applicable, at the rates and bases effective for the relevant Czech tax year; verify with the relevant Czech institutions.
• You can apply higher flat-rate expenses (60%)

Boundaries between § 7 and § 9

§ 9 (lease):

• Simply leaving the property for use
• Without additional services
• Without social and health insurance

§ 7 (business):

• Active provision of services (Airbnb with cleaning, reception)
• With additional services
• With social and health insurance

The most common mistakes of landlords

Mistake 1: Non-taxation of rental income

Some landlords think that if they do not have a trade certificate, they do not have to tax rental income. This is a misconception. The tax office can determine rental income from the real estate register, from data from tenants or from bank statements.

Sanction: A late-filing penalty may apply under the current Tax Code. The amount, minimum, cap and start date depend on the filing and taxpayer facts; verify current Financial Administration guidance rather than using a fixed formula.

Error 2: Including advance payments for services in income

Advances for services (energy, water, heat) that you transfer to suppliers are not your income and should not be included in the tax base. If you include them by mistake, you will unnecessarily increase your tax base.

Error 3: Incorrect application of expenses

You cannot combine flat and actual expenses for different properties. If you have multiple rental properties, you must claim either flat or actual expenses for all of them.

Mistake 4: Forgetting to pay property tax

Property tax is a separate tax that you must pay regardless of whether you rent out the property. The return is submitted by January 31st, the tax is paid by May 31st (or in two installments).

Error 5: Missing records

For flat-rate expenses, you must keep income records. We recommend keeping:

• Lease contracts
• Account statements (incoming rent payments)
• Handover protocols
• Correspondence with tenants

Error 6: Late submission of returns

Late-filing penalties and late-payment interest may apply under current tax rules, with different conditions and caps. Check the current Financial Administration guidance and applicable government regulation for the relevant tax year.

Practical example: Complete tax calculation

Situation

Mr. Novák owns a 2+kk apartment in Prague, which he rents for 20,000 Kč per month. He bought the apartment for 4,000,000 Kč, he is repaying the mortgage with annual interest of 60,000 Kč. In 2024, he repaired the bathroom for Kč 45,000.

Option A: Flat-rate expenses

• Annual income: Kč 240,000
• Illustrative flat-expense method: Kč 72,000
• Tax base: Kč 168,000
• Tax at the applicable rate for the relevant tax year: 25,200 Kč

Option B: Actual expenses

• Annual income: Kč 240,000
• Depreciation (5th grade, equal, 2nd year): Kč 136,000
• Mortgage interest: Kč 60,000
• Property insurance: Kč 6,000
• Bathroom repair: 45,000 Kč
• Real estate tax: Kč 4,200
• Total actual expenses: Kč 251,200
• Tax base: 0 Kč (expenses exceed income)
• Tax: 0 Kč
• Tax loss to be transferred: Kč 11,200

In this case, thanks to the actual expenses, Mr. Novák does not pay any tax and can also claim the loss in the following 5 years.

Tips for tax optimization

1. Every year, compare both methods

Before submitting the tax return, calculate both options and choose the more favorable one. You can change the method between years.

2. Plan investments

If you are planning a major repair or renovation, consider the timing to maximize the tax effect. In the year of the big investment, the actual expenses will pay off.

3. Record everything

I if you are currently using lump sum expenses, record the actual expenses. You can thus easily compare and possibly switch to real expenses.

4. Use a tax advisor

An investment of Kč 3,000-5,000 in a tax advisor can return many times over. In addition, you will get an extended deadline for submitting the return until July 1.

5. Don't forget about tax discounts

I you can apply standard tax discounts for rental income:

• Taxpayer discount: apply the amount applicable for the relevant Czech tax year
• Spouse discount without income
• Tax benefits for children

Summary

Taxing rental income doesn't have to be complicated if you know the basic rules:

• Rental income with a tax rate applicable for the relevant tax year
• You can apply illustrative flat-expense method or actual expenses
• Passive rental income under § 9 is generally not subject to social and health insurance, but classification and actual activity must be checked
• Submit the declaration by 31. March (on paper) or 2. May (electronically)
• Keep income records and keep documents for at least 3 years

Correct tax optimization can save you tens of thousands of crowns per year. Invest time in understanding the rules or entrust the declaration to an expert.

How Grento will help you

Grento is the most comprehensive Czech real estate management platform that will help you with an overview of income and expenses for tax returns. Automatic reports and data export for accountants will save you hours of work. Try Grento for free and see for yourself.

> Czech-law scope and editorial note: Legal, tax, accounting, tenancy, service-charge, condominium, metrology, insurance and data-protection statements in this article refer to the Czech Republic and the rules effective for the relevant date. Figures and examples are illustrative, not legal or tax advice. Verify current rules with the relevant Czech authority or a qualified adviser.

> Czech tax clarification: Rental-tax classification, filing thresholds, rates, deductions, advances and social or health contributions depend on the actual activity, services, tax year and taxpayer. Passive rent is generally considered under § 9, while accommodation with services may fall under § 7; property count or stay length alone is not decisive. Check the current Czech Financial Administration guidance.