Property income deficit
A tax mechanism allowing a landlord under the real property income regime to deduct property-related costs (works, loan interest, co-ownership charges) from taxable income when those costs exceed rental receipts. The portion of the deficit deductible from overall income (excluding loan interest) is capped at €10,700 per year; the excess is carried forward against property income for up to 10 subsequent years.
Key points
- Only non-interest costs are deductible from overall income, capped at €10,700 per year.
- The interest portion is only carried forward against future property income.
- The property must remain rented unfurnished for 3 years after offsetting the deficit against overall income.
- Any unused excess is carried forward against property income for up to 10 subsequent years.
Frequently asked questions
How is a property income deficit generated through a renovation project?
A landlord undertaking significant renovation work (refurbishment, insulation, compliance upgrades) may find these costs far exceed the rents collected. The resulting deficit is first offset against property income from other properties, then up to €10,700 against overall income, directly reducing income tax in the year the works are carried out.
Can a property income deficit be combined with other tax schemes such as Denormandie or Malraux?
Generally no. Tax incentive schemes such as Malraux or Historic Monuments have their own specific works-deduction regimes, often exclusive of the standard rules. The Denormandie scheme involves an income tax reduction based on the total cost, but the works are then taken outside the standard real property income regime. The broker recommends seeking specialist tax advice to optimise such arrangements.
Why is it risky to sell within 3 years of offsetting the deficit against overall income?
The 3-year continued-letting condition after offsetting is mandatory. If the property is sold, listed for sale vacant, or changes use within that period, the tax authority claws back the deductions granted, plus late-payment interest. The period runs from 31 December of the year the deficit is offset, a point the broker highlights during structuring advice.
In practice
A landlord under the real-cost regime spends €25,000 on an unfurnished rental flat generating €8,000 in rent. The €17,000 deficit is offset up to €10,700 against overall income, reducing income tax that year, with the remaining €6,300 carried forward against future property income.
Official sources
- Offsetting property deficits (BOI-RFPI-BASE-30-20) · BOFiP — impots.gouv.fr
- Housing and financing information · ANIL
- Mortgage credit (official guide) · Service-Public.gouv.fr