The taxation of rental income in France
This article is about the taxation of property income for a French tax resident.
Property income represents income from your property holdings. It’s the rent from your unfurnished property rented (the income of your furnished property are to be declared as trading profits called BIC and not as property income).
This property income is taxable property. Two tax regimes are possible:
- The common law system or real regime: It is the difference between gross income and expenses inherent in rented property. Maintenance costs paid by the tenant are not to be declared.
The charges must be supported and paid by the owner during the taxation year for the acquisition or conservation of property income. For example, this may be:
- Insurance premiums
- Custodian fees
- Interest and borrowing costs
- Property tax
- Management fees
- Expenditure on repairs, maintenance and improvement.
Taxpayers who come within the real regime of taxation are required to subscribe a printed appendix to the Declaration No. 2042. This is the declaration No. 2044 or the Special Declaration No. 2044 (dedicated to those who have opted for at least a special regime such as Besson, Robien, etc.)..
- The micro-land system or fixed regime: If your gross income from property do not exceed € 15 000 per year, you get a discount of 30% on your gross income from property. This allowance is a fixed deduction corresponding to the expenses of the owner.
This plan may be disadvantageous in years when your expenses and loan interest exceed 30%, especially if you do large jobs that are deductible. If a household for tax purposes implements an operation of tax exemptions (related to a rental investment), pre-existent income will be taxed under the normal regime.
The transition to the common law system is automatic when the gross property tax revenues exceed 15 000 Euros. Before moving on to the real regime, make sure that the amount of your deductible expenses exceeds the 30% reduction for 3 years. After these three years the common law system is tacitly renewed but you can return to the micro-land regime by request to the tax office.
Any specific statement is to make: just carry forward the gross amount of property income (rent excluding charges) directly on the statement of total revenues No. 2042.
Property income can lead to a deficit that will be chargeable on total income of the tax household to a maximum of 10,700 and carried forward, beyond, the property income of the following 10 years.
Income is also subject to contributions, and in some cases, the contribution on rental income.
The investments in new rental housing have benefited from several tax incentive schemes, bitterly modified over the recent Finance Act. The landlords who have invested in previous years are eligible to the amortization of rental housing subject to meet the requested conditions. The main tax advantage lies in the ability to pay off a portion of the cost of housing, such amortization deducted from property income received by the landlord. They include:
- Périssol amortization
- "Besson" amortization
- "Robien classic" amortization
- "Robien" amortization
- "Borloo nine" amortization
- Buildings under the law on historical monuments
Scellier and Duflot Law offer a reduction of taxes paid and not an amortization as the previous tax laws organised.
More information on the taxation of rental income may be found on the HM Revenue & Customs website.