Renting Out Property as a Sole Proprietor

Why isn't it automatically business income?

The Szja tv. explicitly states that a person who chooses to have their rental income taxed under the self-employment (önálló tevékenység) rules doesn't count as a sole proprietor for that income, even if they're otherwise a registered sole proprietor. That means your rental income is, by default, kept separate from your business activity: it doesn't factor into either the vállalkozói szja or the átalányadó revenue or income calculation, and it isn't subject to the business cost-deduction rules.

If you don't make that choice, rental income counts as business revenue, and is taxed under whichever regime you use, vállalkozói szja or átalányadó, just like any other business revenue.

In practice, self-employment taxation is better for most sole proprietors, because the more favorable, rental-specific rules below, the 10% cost ratio, depreciation catch-up for older buildings, and the social contribution tax exemption, only apply under that choice.

How do you make this choice?

No separate advance declaration is required: the choice is expressed by how you file, reporting the rental income under the self-employment rules, kept separate from your business revenue. A KATA taxpayer can't make this choice at all: for them, renting out property is a disqualifying activity, so they can't operate under KATA at all while they rent out real estate.

Determining income: the 10% cost ratio or itemized deduction

A landlord taxed under self-employment rules can determine their income in one of two ways:

• A 10% cost ratio: 90% of revenue counts as income, and no depreciation or other itemized cost can be deducted alongside it.
• Itemized deduction: expenses actually, verifiably tied to the rental can be deducted against revenue, including depreciation and refurbishment cost for a fixed asset used exclusively for the rental, under the rules described in the fixed assets article. If the property isn't used exclusively for the rental, depreciation and refurbishment cost can only be deducted in time- or area-proportion. A special rule lets you claim, in one lump sum, depreciation for prior years you never claimed, if you acquired the building or building unit more than 3 years ago and never previously deducted any depreciation on it.

Whichever method you pick applies for the whole tax year, and must be applied consistently across all your self-employment revenue, not just the rental. If you've already received a payment in the year and asked for the 10% cost ratio to apply to it, you can't switch to itemized deduction later that same year.

Advance tax: renting to a payer or to an individual?

If the tenant is a payer (typically a company), the payer must establish and withhold the advance tax, based on your declaration of costs up to 50% of revenue; without a declaration, 90% of revenue is the advance-tax base. You can still claim the actual, possibly higher, deductible cost in your annual SZJA return.

If the tenant is an individual, you must establish the advance tax yourself and pay it quarterly, by the 12th of the month following the quarter.

Either way, the tax rate is 15%.

No social contribution tax is due

No social contribution tax (szocho) is due on rental income, regardless of whether you determine income with the 10% cost ratio or itemized deduction. This is one of the most important differences from business revenue: the minimum tax base rule covered in the social contribution tax article doesn't apply to your rental income at all.

VAT: exempt by default, with exceptions

Renting out real estate (or part of it) is, by default, a VAT-exempt service, regardless of the landlord's status or the tenant's identity. That means the landlord doesn't charge or pay VAT on it, but in exchange also can't deduct VAT on purchases tied to the rental.

Four cases are always taxable, though, and the exemption above doesn't apply to them:

• when the rental actually amounts to commercial accommodation services,
• renting out space for parking or storing a vehicle, e.g. renting out a garage,
• renting out machinery or equipment permanently attached to the property, e.g. water utility equipment, and
• renting out a safe.

A taxpayer can also elect to make their otherwise VAT-exempt rental activity, including residential rentals, taxable: that decision must be reported to NAV by the last day of the year before the tax year it applies to, and it binds the taxpayer through the end of the fifth calendar year after the year of the election. Once elected taxable, the landlord can deduct VAT on purchases tied to the rental, e.g. renovating the property, but in exchange must charge VAT on the rent.

Passed-through utility costs don't count as revenue

If the tenant reimburses utility costs based on actual consumption, proportionally passed through from a service the landlord purchased, that amount doesn't count as the landlord's revenue. But if the rent is a single lump sum that includes utilities, or the parties agree on a fixed reimbursement amount, the full amount counts as rental revenue, against which the actual utility cost incurred can then be deducted.

If you also rent housing in another town

If the rental, or your own tenancy, lasts more than 90 days, you can reduce your rental revenue by the rent you verifiably paid, in the same year, for housing you rented in another town, as long as you haven't already deducted that cost against income from another activity related to the rented housing. The housing you rent elsewhere doesn't have to be in Hungary.

This article is for general information only, does not constitute tax advice. Source: the Personal Income Tax Act, 1995. évi CXVII. törvény, primarily section 3.17 and annexes 2, 3, and 11, and the VAT Act, 2007. évi CXXVII. törvény (net.jogtar.hu), and NAV information booklet no. 10, "Ingatlan bérbeadásának és egyéb hasznosításának adózása" (2026. 02. 03.).

Last updated: July 31, 2026.