Depreciation (furnished rental)
Depreciation under the LMNP actual-expense BIC regime involves deducting each year a fraction of the value of the property, furniture, and equipment over their estimated useful life. This non-cash accounting charge reduces the tax base without any cash outflow, often allowing rental income to be fully offset and generating a carryforward BIC deficit.
Key points
- The building (excluding land, which is not depreciable) is typically depreciated over 25 to 40 years.
- Furniture and equipment are depreciated over 5 to 10 years depending on their nature.
- Depreciation cannot create or worsen a BIC deficit — the excess is carried forward.
- Unused depreciation is carried forward with no time limit.
- At the time of sale, carried-forward depreciation does not reduce the capital gain for a LMNP (private individual regime applies).
Frequently asked questions
How does LMNP depreciation make a rental investment tax-neutral?
By stacking property depreciation (e.g., 3% per year on the building value excluding land) and furniture depreciation with other charges — interest, property tax, insurance — the BIC result often falls to zero or a carryforward deficit. The investor receives rents net of expenses but pays no additional tax for many years.
Why does LMNP depreciation not affect the capital gain at resale?
Unlike LMP, the LMNP falls under the private individual capital-gains regime (Article 150 U of the General Tax Code), which computes the gain on the difference between the sale price and the original acquisition price, ignoring prior depreciation. This is a distinct advantage over LMP or an IS-taxed SCI, where depreciation reduces the fiscal cost basis.
How are property components broken down to compute LMNP depreciation?
The component method (French PCG accounting standard) splits the building's value into distinct items: structural framework (50-60 years), roof (20-30 years), facade (15-30 years), technical installations (10-15 years), and interior fittings (7-12 years). Each component is depreciated separately, boosting deductions in the early years. A specialist accountant typically draws up this schedule.
In practice
Sophie buys a furnished studio for €180,000 (land valued at €20,000, leaving €160,000 depreciable) plus €8,000 in furniture. She depreciates the building at 3% (€4,800/year) and the furniture at 20% (€1,600/year). Combined with loan interest (€3,500) and other charges (€1,200), her €11,100 in annual rents produce a nil BIC result and no additional tax.
Official sources
- Furnished rental: depreciation (BOI-BIC-CHAMP-40-20) · BOFiP — impots.gouv.fr
- Housing and financing information · ANIL
- Mortgage credit (official guide) · Service-Public.gouv.fr