A landlord renting a two-room apartment in Lyon unfurnished and a furnished studio in Bordeaux does not fill out the same boxes on their tax declaration, does not deduct the same expenses, and does not pay the same amount of tax. The taxation of rents in France is based on choices of regime and status that, if poorly calibrated, eat away at a significant portion of the net yield. Understanding these mechanisms allows one to maintain control over what a property actually generates.
Social contributions and marginal rate: the true tax cost of received rent
One often starts by looking at the amount of rent collected. The reflex should rather be to calculate what remains after passing through the tax box. Rental income is subject to a double deduction: income tax, at the progressive rate according to the landlord’s marginal bracket, and social contributions at a rate of 17.2%.
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In concrete terms, a landlord whose marginal rate is at 30% sees their net rents reduced by nearly half due to the combination of the two. The actual tax rate often exceeds what landlords anticipate, especially when one forgets to include social contributions in the initial calculation.
To learn everything about rent taxation, one must first establish this foundation: the chosen regime determines the taxable base, and thus the extent of this deduction.
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Micro regime or real regime: choose based on the actual expenses of the property
The choice between micro (micro-property for unfurnished rentals, micro-BIC for furnished) and real regime is not a theoretical question. It is decided by comparing two figures: the flat-rate deduction on one side and the total deductible expenses on the other.
When micro-property is sufficient
In unfurnished rentals, the micro-property applies a 30% deduction on gross rents. This regime is only suitable when actual expenses remain below 30% of rental income. A recent property, with no work needed and low management fees, can benefit from this.
In furnished rentals, micro-BIC offers a 50% deduction. The threshold for relevance is higher, but the logic remains the same: one compares the flat rate to the actual.
Why the real regime changes the game for an old property
For an apartment that requires renovation work, loan interest, management fees, and insurance premiums, the total expenses often exceed the flat-rate deduction. The real regime then allows for the deduction of all these expenses. In unfurnished rentals, one can even generate a property deficit applicable to overall income, within the limits set by the tax code, which reduces tax beyond just rental income.
Deductible expenses under the real regime include:
- Loan interest and bank fees related to the acquisition of the property
- Maintenance, repair, and improvement work (excluding construction or expansion)
- Rental management fees, whether entrusted to an agency or handled directly
- Property tax, non-occupant owner insurance premiums, and non-recoverable co-ownership charges
It should be noted that opting for the real regime commits one for a minimum duration. This is not a choice that can be adjusted each year based on occasional work.
LMNP status and depreciation: the tax lever of furnished rentals
The status of Non-Professional Furnished Rental (LMNP) under the real regime opens up a mechanism that unfurnished rentals do not offer: the accounting depreciation of the property and furniture. This means that one deducts each year a fraction of the value of the housing and its equipment, without it representing a cash outflow.
In practice, depreciation can absorb nearly all taxable rental income for several years. The landlord receives their rents, but their taxable base remains close to zero. Returns vary on this point depending on the property’s value and the amount of rent, but the effect remains the most powerful tax lever accessible to individuals in furnished rentals.
Unused depreciation (when it exceeds the rents) carries over indefinitely. It does not create a deficit applicable to other income, unlike the property deficit in unfurnished rentals, but it constitutes a stock of deductions that can be utilized in subsequent years.
Short-term furnished rentals: a tightening fiscal and regulatory framework
Renting a property furnished on platforms like Airbnb seemed to combine high yield and advantageous taxation. The context has changed. Several major cities like Paris, Lyon, Bordeaux, and Nice have strengthened their rules: quotas on secondary residences available for short-term rental, compensation obligations, and increased municipal controls.
The fiscal and economic interest of short-term rentals is clearly declining in tight markets. Reporting obligations are heavier, authorizations are harder to obtain, and penalties for non-compliance have become stricter.
For a landlord who is hesitating between short and long-term rentals, the calculation is no longer limited to comparing gross rents. It is necessary to integrate:
- Management and cleaning fees between each tenant, which weigh on net yield
- The regulatory risk related to municipal changes, which is difficult to predict in the medium term
- Higher vacancy rates off-season, especially in non-tourist cities
Long-term furnished rentals under LMNP status offer a fiscal and rental stability that short-term rentals no longer guarantee in the most regulated markets.
SCI subject to corporate tax: depreciating the property in a company
Investing through a real estate company (SCI) subject to corporate tax (IS) allows for the depreciation of the property as in LMNP, but within a corporate framework. Profits are taxed at the reduced IS rate as long as they remain within the company, allowing for reinvestment without immediate personal taxation.
The trade-off manifests upon exit: the capital gains tax is calculated on the net book value (after depreciation), which mechanically increases the taxable amount upon resale. This mechanism is suitable for an investor who capitalizes over the long term and does not plan to sell quickly.
The taxation of rents in France is not limited to a binary choice between two regimes. Each situation (type of rental, level of expenses, holding horizon, legal status) calls for a different arbitration. The most common trap remains sticking to the default regime without checking if the real regime or a change of status would yield a better net return after tax.