The Property Owner’s Blog
The Complete Guide to Taxation for Your Property Rental
Everything You Need to Know About Taxation for Your Furnished Rental
Holiday rentals are furnished accommodations (villas, apartments, or studios) rented to transient guests for short-term stays.
An attractive opportunity to generate additional income, but it’s essential to understand the associated tax implications. Before taking the plunge and renting out your property, take the time to familiarize yourself with the tax conditions that will apply to you as an owner.
In this article, we explore the key considerations for renting out your property legally while optimizing your tax obligations.
Holiday Rental: Which Tax Regime Can I Benefit From?
The Micro BIC Regime
The Micro BIC regime (industrial and commercial profits) allows you to benefit from a standard deduction on all your rental income received. Your profits are taxed according to your marginal tax bracket. (The marginal tax bracket is calculated based on your household income and your family quotient).
It's important to distinguish between classified and non-classified Micro-BIC regimes:
Since the 2024 Finance Act, if your property is classified, by opting for Micro-BIC, you’ll benefit from a standard deduction of 30% provided that your revenue from the previous year or the year before does not exceed the threshold of €188,700, and 51% if your classified property is located in a high-demand area (https://www.service-public.fr/simulateur/calcul/zones-tendues) and your turnover is less than €15,000.
Example: if you receive gross rental income of €18,000, your taxable income will be €12,600 or €8,820 (51% deduction).
If your property is not classified, by opting for Micro-BIC, you’ll benefit from a standard deduction of 30% provided that your revenue from the previous year or the year before does not exceed the threshold of €15,000.
Example: if you receive gross rental income of €18,000, your taxable income will be €12,600
The Micro-BIC regime applies to individuals; it is therefore not available for joint ownership or companies (legal entities).
The Actual Regime
The good news for you as an owner subject to the actual regime is that many expenses related to the rental can be deducted from your rental income, which reduces your taxable amount.
Common deductible expenses include:
- Property management fees,
- Mortgage interest,
- Property taxes
- Repair and maintenance costs,
- Insurance premiums,
- Condominium charges,
- And travel expenses related to rental management.
Are You a Professional or Non-Professional Landlord?
- You are a professional landlord (LMP) when your rental income exceeds €23,000 per calendar year and when your revenue is greater than the household’s total income.
- You are a non-professional landlord (LMNP) when your rental income is less than €23,000 or when your rental revenue represents less than 50% of your household income.
IMPORTANT: in the case of LMNP activity, if you are a legal entity (joint ownership or company), you cannot benefit from the MICRO regime; the actual regime is then mandatory.
Business Property Tax and Housing Tax
As an investor owner, when you decide to opt for the furnished rental regime, you are subject to the business property tax. This amount is around €250 and depends on several factors:
- The rental value of your property,
- And the turnover you generate.
In some cases, you may be exempt:
- Either by decision of the municipal council,
- Or because you have a turnover below €5,000.
When I pay the CFE, is it normal to pay a housing tax?
In principle, you are not required to pay this housing tax.
- If it’s your second home, the tax authorities may consider that you have personal use of your property. In that case, it’s perfectly normal to pay both the housing tax and the business property tax since you have private use of it.
- However, if it’s a holiday rental that you’re looking to rent out year-round, the housing tax should not be due. If this applies to you and you’ve paid this housing tax, you may be able to submit a tax relief request to the tax authorities by providing your availability calendar or sharing the management agreement you signed with Vacancéole Particuliers.
Housing tax:
- In principle: due by the occupant.
- If you rent and live there: it’s normal to pay it.
- If you rent 100% of the time: you can request tax relief.
VAT and Local Taxes
Furnished rental (including holiday rentals): does not allow VAT recovery, except if you offer three of the four para-hotel services (reception, housekeeping, linen, breakfast) in addition to your accommodation service. click here to learn more
With the help of our partner
Simplify the Accounting and Tax Management of Your Rental Property
Amarris Immo, a partner for real estate professionals, is a chartered accountancy firm registered with the Order of Chartered Accountants, specializing in rental income tax returns.
Since 2013, Amarris Immo’s in-depth knowledge of rental real estate, its accounting management, combined with a complete mastery of tax issues, has enabled it to provide real added value and to facilitate the accounting and tax management of your rental property.
Renting out your property can be an interesting source of income, but it’s subject to specific tax conditions. To avoid problems with tax authorities, make sure to correctly declare your rental income, take advantage of the deductions you’re entitled to, understand the tax regime that applies to your situation, and comply with local tax obligations.
Sound tax management will help ensure the success of your property rental.