Rental investment has always been particularly popular in France. As long as you choose the property wisely, it is possible to repay your mortgage thanks to the rents collected, before taking advantage of the capital gain from a resale to finance your own family home or to keep the home while ensuring income. complementary.
But private landlords also have to bear many daily costs to maintain and manage their rental. Hence the tax rebate implemented.
A matter of imbalance
As the owner of a rental property, it may be that the amount of your charges turns out to be higher than that of your rental income in some years. Not so rare, this situation occurs especially when you have had to carry out major improvement work in the home, when the condominium fees have exploded due to renovations in the common areas, or in the event of too long a period between two rentals. We are talking about a land deficit.
In order not to accentuate this delicate financial situation, the tax administration allows you to deduct the share of expenses greater than your property income in the calculation of your overall income, and therefore to reduce the amount of your income tax. You can deduct up to 10,700 euros per year for the land deficit, sometimes more in some cases. If the amount of your deficit exceeds this ceiling, you will be able to defer and deduct the rest of the sum for several years (six by deducting it from all of your income and ten by deducting it from your property income only).
This tax advantage is, however, restricted to owners who have opted to rent out bare accommodation, in other words unfurnished. Be careful, you must also choose the real tax system to benefit from the deduction of the land deficit. However, more often than not, it is the micro-land regime, with a fixed allowance of 30%, which is applied by default by the tax administration. It is therefore up to you to make the change, knowing that this option will be irrevocable for three years.
In addition, the law strictly determines the type of charges taken into account in the context of a land deficit. At the top of the list, you must first deduct the interest and costs of your mortgage for this property. Then assess the amount of your management and administration costs (real estate agency, property manager, janitor’s salary, etc.). The same goes for insurance premiums linked to housing and local taxes not recoverable from the tenant (property tax). The provisions for the co-ownership, as well as the rental charges that you were unable to recover when the occupant left, are also part of the lot, as is any compensation for eviction or rehousing of the latter. . Finally, repair and maintenance expenses can also be deducted, as long as they aim to facilitate the rental or to compensate for the dilapidated condition of the dwelling. Conversely, pure construction or extension works are excluded from the calculation.
A good plan ?
The land deficit therefore aims not to impose too heavily on taxpayers facing significant expenses. It can be a lifeline for homeowners having difficulty renting out their property or facing a rental dispute with a bad debtor.
But this device also represents a tax boon for seasoned investors. The strategy consists in acquiring old housing requiring major works and the price of which is inevitably lower. And thanks to the land deficit system, you can renovate it at a lower cost by deducting the costs from your taxes. It is therefore a tax exemption tool that will allow you to benefit from a nice added value during resale. The only requirement is to rent the property for at least three years.