Reporting on the necessary steps to disclose rental income:
Let's Sort This Rental Tax Bullshit
By Léa Boluze for Rent Lords Daily Updated on
- Copy link Link copied
Contents
- Real estate or industrial profits? What's the difference for your tax returns?
- Living essentials or luxury furnishings? How to differentiate bare rentals and sweetened deals
- Taxation of your rental income
- Furnished vacation rentals? What are the rules
- Tax rates for your rental income
- Which tax regime for your empty rental: micro-leasing or full-on real estate?
- Declaring a non-professional furnished rental
- Declaring a professional furnished rental
- Cutting taxes on your rental income
Real estate or industrial profits? What's the difference for your tax returns?
Long story short, the tax game changes depending on whether you're renting out an unfurnished or a furnished crib. Here's the breakdown:
Real estate income:Definition
When you rent an empty, sorry-ass dwelling or a commercial dump without any gear, you're dealing with real estate income. This is subject to taxes in the real estate income category. This covers:
- Cold, empty buildings
- Crappy commercial spaces
- Barren land
Rental income: Definition
Rental income just means the cash you rake in from your rent hustles, be it unfurnished or furnished. Taxes factor in:
- The rent you snag over the year (cash-based accounting)
- Insurance payouts for unpaid rent
- Extra income from ancillary services like workshops, storage, or parking lots
Security deposits (motherfucking guarantees) remain untaxed as long as they aren't paid as compensation.
Living essentials or luxury furnishings? How to differentiate bare rentals and sweetened deals
There are two main styles of renting in France, each posing different rules and fiscal implications. Choose wisely based on your aims: simplicity and security with bare rentals, or potentially fatter paydays with the furnished option.
Princess-and-the-Pea Rentals (Long-term or seasonal)
Alright, by "furnished," we mean renting a crib that's kitted out with essential furniture, appliances, and utensils to make habitation instantly cozy (beds, tables, dishes, and so on). This category falls under the industrial and commercial profits, aka, BIC, regime. The lease is more suppler (a year or nine months for students), and the tax treatment can be more profitable, especially if you opt for the full-on real regime.
Bare-Bones Rentals (Long-term)
Traditional, unfurnished rentals involve leasing vacant, unadorned dwellings. These suckers are taxed under real estate income regulations. They offer greater legal stability for both owner and tenant, usually is a three-year lease, renewable.
LMNP (Non-Professional Furnished Rentals) vs LMP (Professional Furnished Rentals)
Sometimes, furnished rentals fall under:
- LMNP status, common for people when their furnished rental income doesn't exceed €23,000 per annum. This allows for a simplified or full-on real estate regime with depreciation.
- The LMP status comes into play when rents exceed the 23k mark and represent the household's main source of income. It offers additional tax advantages, like the ability to offset deficits against total income and exemption from capital gains tax under certain circumstances.
Hit up the Airbnb Zone!
How are rental income taxed?
Taxation soul on rental or revenues
Rental income is taxed based on its nature and the chosen or applicable tax regime. Did you get that? Let's simplify - in France, there are two main categories of rental income: real estate (vacant) and industrial and commercial profits (furnished). Here's what to expect:
LMNP (Non-Professional Furnished Rental): Micro-BIC or Full-on Real Regime
LMNP is for people who rent out furnished pads without it being their primary hustle. Two options occur:
- Micro-BIC (by default, if income is less than €77,700 yearly). A 50% deduction on charges is applied here.
- Full-on real regime (optional or mandatory when income explodes beyond the thresholds). It allows for actual charges deductions and furniture depreciation, but demands commercial accounting.
Professional Furnished Rental (LMP): Micro-BIC or Full-on Real Regime
This status applies when annual rental income surpasses €23k and outpaces other professional income. Treatment is identical to an LMNO, meaning real BIC. Swag: you can offset deficits against total income without a cap.
Headz up, Property Sharks!
People who lease out vacant cribs should declare their income under the rental income category. Two regimes are possible:
- The micro-leasing regime (automatic if gross income is below €15,000), offering a 30% deduction on charges.
- The full-on real regime (mandatory or optional when income tops €15k), which allows for full charge deductions and a rental deficit creation that can be offset against income (up to €10,700 yearly).
- Rentals includes the gross rents collected. Other income should be accounted for, too, like insurance payouts for unpaid rent, ANAH subsidies, and income from ad space rentals.
How to Write Your Own Rental Lease?
How are furnished tourist accommodations taxed?
Taxable firewood: Furnished holiday rentals
Furnished vacation rentals - holiday homes, bed & breakfasts, seasonal lettings - belong to the same tax category as other furnished leases: industrial and commercial profits. However, they benefit from specific rules based on whether they're classified or not.
Classified Cribs
These are cribs blessed with official star ratings (1-5) from an approved body. In tax terms, the micro-BIC scheme is possible if annual revenue is below €77,700 (a major cut in 2025). Bonus: a 50% flat-rate allowance is applied.
An extra 21% allowance is up for grabs if furnished holiday rentals are located outside urban areas if annual income from furnished rentals doesn't top €15k.
Unclassified Cribs
These are seasonal rentals without an official rating. The micro-BIC scheme applies if annual income is below €15k and includes a 30% flat-rate allowance (just like other furnished rentals).
Tax rates for rental income
Empty Nest Taxation
Rents from vacant properties are taxed under the rental income category. After a 30% allowance as a micro-leaser or real estate expense deductions in the real regime, the net rental income is added to your total income and taxed according to the progressive income tax scale (0-45% depends on the category).
Cushioned Nest Taxation
Rents from furnished homes fall under the BIC regime, under LMNP or LMP styles. In micro-BIC, a 50% flat-rate allowance is applied, then the net income is subject to the progressive income tax scale. Great news: you benefit from deductible charges and amortizations with this deal.
Social Contributions
Social contributions scrub down every income stream, including property rewards, with a global rate of 17.2%, split between CSG (9.2%), CRDS (0.5%), and solidarity tax (7.5%). These bad boys are computed on net taxable income and tacked on to income tax.
Yo, Airbnb Folks!
Which tax regime for the rental income of a bare rental: micro-leasing or full-on real?
Digital Leasing Down Low
If the annual rental income is less than €15,000, you're automatically operating under the micro-leasing regime. However, you can choose the real regime. If the annual rental income exceeds €15,000, you're pegged to the real regime.
Micro-Leaser Chronicles
The micro-leasing regime is a simplified tax regime. Joyride: simply report the amount of rental income received during the year in your tax return, form 2042, box 4 "income from real estate", line 4BE.
The tax authority then applies a 30% allowance for expenses connected to the rented property. The remainder gets lumped with other income to be subjected to the progressive tax rate on income.
The Real Deal
The real regime comes into play automatically if real estate income surpasses €15,000. If you're leasing under micro, you can also opt for this regime for minimally 3 years. If the real regime cuts in, complete form n° 2044. The results of this claim get reported on form n° 2042.
Lease Downtime
After determining real estate income, you must calculate deductible property expenses connected to the rented property. Expenses:
- Repair/improvement work expenses
- Loan interest
- Co-ownership charges
- Insurance premiums
- Taxes
- Management fees
Beneficial or Deficit Real Estate Result
If property expenses fall short of rental income, the real estate result is beneficial. It's taxable along with other income according to the progressive income tax scale. If it's higher, the result is deficit.
If the deficit exceeds €10,700, it gets carried forward to the following ten years.
Declaring a non-professional furnished rental
For smol gains
If revenue, including charges, doesn't exceed €77,700, the micro-BIC regime rolls in. No worries: with the micro-BIC regime, you only need to declare the amount of real estate income and snatch a 50% deduction from the tax authority. The total income gets reported on a supplementary tax return, filed on form 2042-C-PRO (box 5ND).
For windfall gains
If your rental income exceeds €77,700 or upon request, you can subtract all property expenses from rental income. Then, you gotta complete professional declaration form 2031-SD.
Declaring a professional furnished rental
Crunching Numbers for Your Rental Income
The calculation of tax on rental income occurs in two primary phases: determining the taxable net income.
- In micro, expect a 50% deduction.
- In real, income = cash receipts - expenses - depreciation.
The net income, in turn, is added to the household's overall income and subject to the progressive income tax scale (0-45% depending on the bracket). A global social contribution rate of 17.2% (except mandatory social contributions for jobsters grinding full-time in LMP) gets applied then.
Declaration Central
For professional furnished rentals, the declaration process kicks off via a specific form for BIC:
- Form n° 2031 (declaration of results of the furnished activity), filed with the tax office for businesses (SIE).
- This result then gets reported in the personal income tax return (form 2042-C-PRO), in the "Professional industrial and commercial revenues" box.
Slashing Taxes on Your Rental Income
It's impossible to dodge taxes on rental income, but you can drastically reduce, or even momentarily nullify, the tax owed.
Flipping to the Real Estate Regime to Maximize Deductions
In the case of unfurnished rentals, the real regime lets you deduct real estate charges (work, loan interest, property tax, and so on). If these expenses surpass the rent, it generates a real estate deficit that can be offset against overall income (up to €10,700 per year).
In furnished rentals (LMNP or LMP), the real regime allows you to deduct charges and even furniture depreciation, which can significantly slash taxable profit - sometimes to zero for several years!
Banking on Tax Schemes
Ready to significantly cut or even nullify tax on rental income? Consider investing in tax schemes provided by law. Such schemes offer ways to reduce tax bases or score tax reductions under certain conditions of location, rental duration, and rent ceilings.
Going Commando
By owning a property in bare ownership, you don't get squat as you're the usufructuary, so you don't pay taxes on rental income for the entire duration of the usufruct. During this time, you're also exempt from IFI tax for this property.
- In the real estate income category, commercial dumps without any gear are subject to taxes, while cold, empty buildings and barren land also fall under this category.
- Rental income, whether from unfurnished or furnished properties, includes the cash collected from rent over the year, insurance payouts for unpaid rent, and extra income from ancillary services.
- Furnished rentals, positively affecting fiscal implications, are grouped under the industrial and commercial profits, or BIC, regime when the lease is more flexible and lasts a year or nine months for students.
- Real estate income and the chosen tax regime determine how rental income is taxed, with two main categories in France: real estate (vacant) and industrial and commercial profits (furnished).
- For non-professional furnished rentals, if revenue, including charges, doesn't exceed €77,700, the micro-BIC regime applies, allowing for a 50% deduction from the tax authority.
