Regarding rental income, there are two categories.
For bare rental, or in other words, classic rental, the income is taxed in the category of property income.
For furnished rentals, income is taxed in the BIC category (Industrial and Commercial Profits).
The different statuses: LMNP or LMP?
Non-professional furnished rental company (LMNP)
- Be the owner of at least one property and rent it out under a commercial lease
- Not to be registered or register of commerce and companies (RCS) as a professional furnished rental company
- Withdraw from this activity an amount of annual revenue less than or equal to 23.000 euros and / or less than 50% of the total household income
The income from the LMNP bears social security contributions at the rate of 15.50%, since they are considered as income from capital.
Furnished accommodation is considered as non-professional property and as such, it is subject to ISF unlike LMP.
Property income deficits can only be charged up to the annual limit of € 10700 for a maximum of 10 years.
Professional furnished rental company (LMP)
- Registered in the commercial register
- Receipts are greater than € 23 including tax / year
- Rental income greater than the income of the tax household
Compared to LMNP, LMP benefits from the following tax advantages:
In terms of capital gains, you are totally exempt from taxation in the event of the sale of a home if it has been rented for at least five years and if your income does not exceed € 90.000. Between 90.000 and 126.000 €, the exemption is partial.
If the activity has been carried out for less than 5 years or if the revenues exceed 120 €, the taxation of capital gains is total. Under certain conditions, the capital gain can benefit from the proportional tax rate of 000% (16% with social security contributions).
Unlike the LMNP which is subject to social security contributions at the rate of 15.5%, the LMP supports the CSG on earned income (8%).
Under the LMP, furnished accommodation is considered as professional property and as such, it is not subject to ISF.
As an LMP, you can deduct any deficit from your overall income for the year, with no limit on the amount against 10 € / year for 700 years for the LMNP.
Tax regimes: micro BIC or real?
Furnished rental is one of the last tax loopholes, if not the last, concerning old real estate.
as income is taxed in the BIC (Industrial and Commercial Profits) categories, you are therefore considered to be a trader with a micro-enterprise.
As a result, two tax regimes are available to you :
Micro BIC
Owners whose rents including charges do not exceed € 32 / year are subject to the micro-BIC.
This diet is very easy to use. Indeed, it suffices to indicate the turnover received during the year on the 2042 C income tax return under the heading Industrial and commercial profits.
Turnover = Rent + charges or the gross rent.
Once the declaration has been completed, the tax administration applies a standard reduction of 50%. You are therefore taxed only on half of your turnover.
This amount will be taxed according to your marginal tax rate (TMI) + social security contributions which represent 15.5%.
Example:
- On a turnover of 5000 €, only 2500 € will be taxed
- My IMR is 0%, my tax will only be equal to 15.5% of the € 2500, or € 387.5
- My IMR is 14%, the € 2500 will be taxed at 14% + the 15.5% of social security contributions, i.e. € 737.5
Another advantage is that the accounting is less restrictive. Only a notebook where you update your receipts is necessary (in order to be able to justify everything if the tax administration asks you for anything).
This scheme is quite attractive, however, NO other charges can be deducted which can be a disadvantage when work has been done or the charges are really large. This is why you can choose an option on the second regime.
Real
In excess of € 32 in turnover or on option, you are subject to the actual regime. There is no more allowance from the tax administration. You will have to keep accounts yourself or through an accountant (whose costs are deductible), declare the rents and deduct the charges.
Different charges are deductible:
- Make a notary
- Property tax and CFE
- Management fees by the agency
- Condominium fees
- Accounting fees
- Interest on loans
- Insurance (home, unpaid rents, etc.)
- Works
- Furniture (from the bulb to the television, including the bed, the kitchen, etc.)
Depending on the investor's profile, the actual regime is often more advantageous than the 50% reduction in the micro-BIC regime. You can make comparisons on several websites or by making an appointment with an accountant.
In addition to the many deductible charges, furniture and improvements are depreciated for 5 to 10 years following the work (carpentry, electricity, plumbing, etc.). Note that the purchase price is also amortized.
Depreciation and the purchase price break down as such:
| Components | Share of components in the price | Depreciation period |
|---|---|---|
| Big work | 40% | 50 years |
| Facade | 20% | 30 years |
| Equipment | 20% | 20 years |
| Interior design | 20% | 15 years |
| Average | 100% | 33 years |
Thus, with everything that is depreciable and deductible, it is possible to realize a deficit. This deficit allows you to avoid paying taxes. (see above)
Example:
- You usually pay € 1000 in tax
- The rents from the furnished rental earn you € 5000
- Your deductible charges are equal to € 10
- 5000 - 10 = - 000
- The deficit therefore amounts to € 5000: you have spent more than earning money
- For 5 years, you will not pay tax
