Paris, France – The French Ministry of Housing is working to reassure rental investors following the introduction of a controversial amendment to the 2026 finance bill. The proposed changes, designed to establish a new tax status for private landlords, have been met with strong criticism for being overly restrictive.
Government Attempts to Allay Investor Fears
Officials from the Ministry stated on Friday that the amendment is merely a “starting point” subject to further discussion within the National Assembly.This comes after industry groups, including The National Union of Real Estate Owners (Unpi) and the National Real Estate Federation (Fnaim), voiced their “deep disappointment” with the initial proposal. The current plan allows landlords investing in new properties from January 1, 2026, to deduct only 2% of the purchase price annually from their rental income through depreciation, provided the property is rented unfurnished for at least nine years.
Depreciation Rates Under Scrutiny
Critics highlight that the 2% depreciation rate significantly undershoots the 5% recommended in a parliamentary report released last June by the Daubresse-Cosson group. Furthermore, the government has capped the annual deductible depreciation at 5,000 euros, aiming to prevent excessive tax advantages. A key omission in the amendment is any provision for depreciation on older properties. While the Daubresse-Cosson report suggested a rate of 4% for existing homes, the government’s proposal focuses solely on new constructions.
The government does offer an extension – for two years – of a system that allows landlords to double the amount of property deficits charged to overall income, covering energy renovation expenses. Property deficits occur when rental expenses exceed rental income and are deductible up to certain limits.The limit was temporarily raised to 21,400 euros for energy renovations completed between January 1, 2023, and December 31, 2025.
A Bercy-Driven Amendment?
Sources indicate the amendment was largely drafted by the Ministry of Economy and Finance (Bercy), explaining its conservative nature amid ongoing concerns about public finances. Despite this, Housing Minister Vincent Jeanbrun is reportedly seeking a compromise during the parliamentary debate, aiming to extend depreciation benefits to older rental properties.
Did you Know? According to data from the National Institute of Statistics and Economic Studies (INSEE), over 30% of French households are renters, making rental investments a notable part of the French economy.
Parliamentary Pushback and Alternative Proposals
The Ministry maintains that the current amendment serves as a “common basis for discussion,” emphasizing that the government proposes while parliamentarians ultimately vote. Several deputies from various political factions have already put forward alternative amendments, proposing depreciation rates ranging from 3.5% to 5% for new properties and 3% to 3.5% for existing ones. These proposals often include bonus rates for properties offered at below-market rents, aligning with the recommendations of the Daubresse-Cosson report.
| Aspect | Government Proposal (New Properties) | Daubresse-Cosson Suggestion (New Properties) | Proposed Parliamentary Amendments (New Properties) |
|---|---|---|---|
| depreciation Rate | 2% | 5% | 3.5% – 5% |
| Old Properties Depreciation | None | 4% | 3% – 3.5% |
| depreciation Cap | €5,000/year | None Specified | Varies (Some propose removing cap) |
Pro Tip: Before making any investment decisions, consult with a tax advisor to understand how these proposed changes might affect your individual financial situation.
Understanding french Rental Property Taxation
France has a complex system of taxation for rental income. Landlords can typically deduct certain expenses, such as property taxes, insurance, and maintenance costs, from their rental income. Though, the rules surrounding depreciation and the ability to offset rental losses against other income are constantly evolving. Staying informed about changes to tax laws is crucial for maximizing your investment returns.
Frequently Asked Questions About French Rental Property Tax
- What is the current tax status for landlords in France? Landlords generally pay income tax on their rental income after deducting allowable expenses.
- What is depreciation in the context of rental property? Depreciation allows landlords to deduct a portion of the property’s value over time, recognizing that it will eventually wear and tear.
- How does the proposed amendment affect landlords investing in older properties? The current proposal does not offer any depreciation benefits for older properties.
- What is a property deficit, and how is it treated for tax purposes? A property deficit occurs when rental expenses exceed rental income. It can be deductible from overall income, subject to certain limits.
- Where can I find more facts about French rental property taxes? The French tax authority website (https://www.impots.gouv.fr/en/) offers complete information.
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