Real estate taxation investors: 2026 tax reductions

In rental investment, net yield depends more on the tax regime chosen than on the negotiated purchase price. Two investors placing the same amount in the same building can show very different after-tax results depending on whether they rent unfurnished or furnished, and depending on the reporting regime chosen. This article sets out the trade-offs that actually create the difference, leaving aside niche schemes.

Unfurnished rental: property income

Rent from an unfurnished property falls under property income, with two possible regimes.

The micro-foncier regime applies automatically below an annual revenue threshold. It grants a flat-rate allowance of 30% covering all expenses. Its simplicity is its only argument: as soon as actual expenses exceed 30% of rent — which is common as soon as there is a loan or works — it becomes unfavourable.

The actual expenses regime allows deduction of actual expenses: loan interest, insurance premiums, property tax, management fees, and above all maintenance, repair and improvement works. Construction, reconstruction and extension works are excluded.

When expenses exceed rent, the property deficit is offset against total income up to an annual cap, with the portion arising from loan interest remaining deductible only against property income. The surplus can be carried forward for ten years. This is the most effective lever of the unfurnished regime, and it requires concentrating works within a single tax year rather than spreading them out.

One constraint accompanies this advantage: offsetting against total income is only granted if the property remains let for the following three years.

Furnished rental: the regime that changes everything

Rent from a furnished property falls under industrial and commercial profits, not property income. This classification, often seen as an administrative subtlety, is the main lever of real estate taxation.

The micro-BIC regime applies a flat-rate allowance on revenue, whose rate and thresholds have been tightened for furnished tourist rentals — a point to check for the current year, as the rule has changed several times.

The actual expenses regime allows deduction of expenses, but above all depreciation of the property and furnishings. The building is broken down into components depreciated over their own useful lives, with land not being depreciable. This depreciation is a deductible expense that does not correspond to any cash outflow: it reduces taxable income without affecting actual yield.

In practice, an investor under the actual expenses regime in furnished rental frequently neutralises their taxation for many years. However, depreciation cannot create a deficit: the non-deductible portion can be carried forward indefinitely against future profits of the same nature.

The choice between unfurnished and furnished therefore hinges less on the headline rent than on this mechanism. It also involves management considerations: faster turnover, equipment obligations, and the constraints described in our rental management guide.

Capital gains on resale

Real estate capital gains for individuals are taxed at a flat rate under income tax, plus social security contributions.

An allowance based on holding period applies, following two distinct schedules: full exemption from income tax is reached after twenty-two years of ownership, and from social security contributions after thirty years. This eight-year gap is systematically underestimated in exit projections.

The primary residence is exempt with no holding-period condition. Other exemptions exist, notably for the first sale of a property other than the primary residence subject to a reinvestment condition, or for low-value disposals.

The acquisition price can be increased by acquisition costs and works, either on a flat-rate or actual basis, which reduces the taxable base accordingly. The corresponding supporting documents must be kept for the entire holding period — a point the notary rarely mentions at the time of purchase.

Holding directly or through a company

The non-trading property company (SCI) is often presented as an optimisation tool. It is primarily a tool for succession and governance.

Under income tax, the company is tax-transparent: each partner is taxed on their share according to property income rules. The tax regime is therefore identical to direct ownership.

Under corporate tax, the logic changes: depreciation of the property becomes possible, taxation at the corporate rate applies, but the capital gain on disposal is calculated on a net book value reduced by depreciation — which produces a taxable capital gain significantly higher upon resale. The option is irrevocable in practice. It suits a strategy of long-term holding and reinvestment, not a medium-term resale. The reasoning echoes what is set out in our article on corporate taxation.

Tax reduction schemes

The landscape has narrowed. The main tax relief scheme for new-build properties is closed to new transactions, and the remaining schemes are more targeted:

• The renovation incentive regimes for older properties, conditional on works and location.
• Agreements with the national housing agency, which offer a tax allowance in exchange for a capped rent.
• The heritage regimes applicable to protected buildings, reserved for major renovation projects and for heavily taxed taxpayers.

None of these compensate for a poor location or a poor purchase price. The constant rule in this area is that the tax benefit is calculated after the transaction, never before: an acquisition that does not hold up without its tax benefit does not hold up at all.

Usage scenarios

First rental investment with a loan. The actual expenses regime under unfurnished rental is almost always preferable to the micro-foncier regime, as loan interest is generally enough to exceed the flat 30% allowance.

Property requiring major works. Concentrate deductible works within a single tax year to create an offsettable property deficit, taking into account the obligation to let the property for the following three years.

Seeking little or no taxed income. Furnished rental under the actual expenses regime, with depreciation, is the most efficient structure. It requires proper bookkeeping, and recoverable charges must be correctly separated from deductible expenses.

Frequently asked questions

Micro-foncier or actual expenses regime? The actual expenses regime as soon as expenses exceed 30% of rent, which is the common case when there is a loan or works. The micro regime is only justified for a property held debt-free and without significant expenses.

Is furnished rental more advantageous than unfurnished rental? Tax-wise, almost always, due to depreciation of the property under the actual expenses regime. The trade-off lies in management: shorter leases, higher turnover, mandatory equipment.

How long before being exempt from capital gains tax? Twenty-two years of ownership for income tax, thirty years for social security contributions. This eight-year gap must appear in every resale projection.

Does an SCI reduce tax? Not in itself. Under income tax, it is tax-transparent. Under corporate tax, it allows depreciation but significantly increases the capital gain on disposal. It is a succession tool before being a tax tool.

Can a property deficit be offset without limit? No. Offsetting against total income is capped annually, with the portion arising from loan interest only deductible against property income. The surplus is carried forward for ten years.

Should invoices for works be kept? Yes, for the entire holding period. They increase the acquisition price when calculating the capital gain, and this increase is refused without supporting documents.

Key takeaways

Three decisions account for most of the difference in net yield, and all are made before the purchase. First, the type of rental — unfurnished or furnished — which determines the tax category and access to depreciation. Then the reporting regime, where the flat-rate option is only justified in the absence of debt and expenses. Finally, the method of ownership, direct or through a company, whose effect is mainly felt on resale.

Tax reduction schemes come afterwards, and never come first. An investment that is only profitable because of its tax benefit remains a poor investment, and the acquisition process itself deserves just as much attention, as detailed in our article on the legal and financial process of a real estate purchase.