Investing in the real estate market is not a decision to be taken lightly. The various laws in force come to frame this market. Many French people choose to invest in rental real estate, seeing it as an effective solution to generate income. However, we must also think about the various risks that this can entail: unpaid rent, damage, charges, etc. Real estate tax exemption is one of the reasons why there is such a craze for rental investment. Reliable and judicious investment, building or buying a property and then renting it out is a solution to reduce the amount of income tax. The State therefore favors this type of project and sets up various mechanisms:
Introduced by article 5 of the law of December 29, 2014 of the general tax code, the Pinel law replaces the Duflot law but operates in the same way. This scheme promotes the construction of homes on French territory and thus reduces the tax base of households. The advantages of this system are numerous for the taxpayer who can realize his project with little or no financial contribution. Of course, to be able to benefit from these tax advantages, the investor must be taxable in France and be at least 18 years old. The rental of the property must also be more than 6 years as specified in the infographics of the Investir site.
On the tenant’s side, the Pinel system aims to make these buildings accessible to as many people as possible. These dwellings are between social housing and high-end housing. There is a calculation formula to know in order to be able to determine the maximum rent ceiling for Pinel accommodation:
Useful surface x Pinel coefficient x Pinel scale
It is important to note that the calculation of the rent depends on the area where the property is located. The device of the Pinel law allows you, in addition to the tax reduction, to tax deduct the actual expenses below:
By investing in an old property, the owner will start work. Renovating and rehabilitating an old dwelling is an effective technique to be able to benefit from a tax reduction. This is explained by the fact that the works are deducted without limit from the rents requested, which leads to a reduction in taxable income. Be careful however, the investor will only be able to benefit from it if the work represents 25% of the total amount of the acquisition.
Thereafter, he will have to respect various conditions related to the ceiling of the rent, the duration of the commitment, the geographical area, etc. This part of the real estate tax exemption, also called “Denormandie device”, allows you to benefit from a reduction of 2% (if you rent or keep the property for 6 years), 18% (for 9 years) or 21% ( for 12 years) of the amount invested. It is important to be well informed about this technique because some work is not deductible.
The Censi-Bouvard regime, adopted in 2009 by the French National Assembly and also called the “Bouvard amendment”, grants tax reductions when the taxpayer invests in furnished accommodation belonging to one of the following categories:
With the Censi-Bouvard regime, the investor benefits from a tax reduction on the value of the property acquired. For 2022, it is 11% of the housing price excluding tax, with a ceiling of €300,000 excluding tax. The commercial lease signed between the operator and the purchaser must be for a period of between 9 and 12 years. It is important to note that the status of LMNP (Non-Professional Furnished Rental Company) and the Censi-Bouvard system are compatible and cumulative.
Introduced at the beginning of 2017, the Cosse law gives owners the possibility of renting a property with a rent adapted to the most modest households, as specified by the defiscalisation.immo website. In order to certify this device, the owner must first:
This law gradually supplements the Denormandie regime and may apply to any purchase made until December 31, 2022.
These 3 regimes are among the most exploited in tax exemption real estate. As this sector of activity is constantly evolving, the solutions available to you when investing may be more or less advantageous, depending on your budget, for your project and for the management of your assets.
