Tax on rental income

Rental income is scaled as any income and is therefore also subject to social contributions (CSG / CRDS).

For unfurnished properties rental income is taxed as « real estate income » and for furnished properties as « industrial and commercial profits » (BIC)

There are two possible tax plans for furnished and unfurnished rentals:
– A lump sum taxation (« micro-foncier » for unfurnished properties and « micro-BIC for furnished rentals ) allowing a 30% relief on the taxable income for unfurnished rentals and 50% on furnished rentals, taxation being calculated on the remaining amount
– The « régime réel » tax plan allowing to deduct from the taxable income all expenses related to the rental (co-property expenses, repairs, insurance, property tax, loan interests…)

For the « régime réel » tax plan and exclusively for furnished rentals, the French tax regulations allows an additional 2 to 3% deduction for accounting depreciation.

As an example, let’s take a 50 sq.meter apartment valued 550K€ and rented 2,000€/ month.

The « régime réel » tax plan allows an accounting depreciation of ~15,000€ (in addition to the other deductible expenses) out of a 24,000€ rental income.

This amortization added to the other rental expenses significantly reduces the taxable income and in many cases is liable to annul it.

In the case of an acquisition immediately followed by a rental the sales and notary costs are also depreciable.