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Rental income: rents largely exempt for furnished rentals (form 2044), All you need to know about the 2022 income tax return

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Rental income: rents largely exempt for furnished rentals

Rental income: rents largely exempt for furnished rentals

Rental income: rents largely exempt for furnished rentals

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| Photo credits: Istock

The furnished rental regime concerns accommodation furnished with all the furniture allowing normal occupancy by the tenant. Income from furnished rentals is taxed as part of industrial and commercial profits (BIC) and is subject to the progressive scale of income tax and social security contributions at the current rate of 17.2%.

50% reduction…

The micro-BIC scheme offers a fixed allowance of 50% on the receipts collected. Only half of the rents collected are thus taxed! In this scheme, no actual charge can be deducted. To be able to benefit from the micro-BIC, your income for the year 2021 must be less than €72,600 excluding taxes. All you have to do is report the total rents collected on the supplementary income statement no.oh 2042 C PRO, box 5 ND.

Rents largely exempt

Rents largely exempt

Furnished: advantageous taxation

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… or reduction of charges

If your income exceeds €72,600 excluding tax or if you do not wish to be covered by the micro-BIC regime, your rents will be subject to the actual regime. In this case, you must also file a declaration noh 2031. You will deduct from your rents all expenses actually incurred on the property (acquisition costs, miscellaneous work, loan interest, etc.).

Added to these charges is the depreciation of the property and furniture. This accounting concept aims to take into account the loss of value suffered by housing and furniture during the past year. Depreciation therefore represents a tax-deductible but non-disbursed charge (unlike work, for example). This is one of the advantages of furnished rentals over bare rentals. Please note that the actual scheme requires the keeping of accounts and the filing of several annexed declarations. The use of an accountant is strongly recommended!

In summary, the choice between the micro-BIC regime or the real regime will be made as follows:

– if the deductible charges + the depreciation are greater than 50% of the rents, the actual regime will be more attractive;

– if this is not the case, the micro-BIC scheme will be preferred.

What tax status?

The furnished lessor is likely to fall under either the status of non-professional furnished lessor (LMNP), or the status of professional furnished lessor (LMP). To be qualified as a professional furnished rental company (LMP), the following cumulative conditions must be met: the annual income from the rental is greater than €23,000 and it must exceed the professional income of your tax household.

Depending on the status (LMNP or LMP), the tax consequences differ. The professional furnished rental company can in principle charge its deficits to its overall income without any limit on the amount, but the capital gains on disposal are subject to the professional capital gains regime. The non-professional furnished rental company, on the other hand, can only charge its deficits to income from non-professional furnished rental accommodation over the next ten years. On the other hand, capital gains from disposals fall under the capital gains regime for individuals.

Watch out for social contributions!

The Social Security financing law for 2021 modified the rules for liability to professional social security contributions for furnished rental companies. The criterion of registration in the trade and companies register (RCS) to be satisfied in order to be considered as a professional furnished rental company (LMP) from a social point of view has been removed and replaced by an income criterion. From now on, furnished rental companies must be affiliated to the social security scheme for the self-employed (SSI) if the annual income from this activity exceeds €23,000 and one of the following two conditions is met:

– the rental is said to be “short-term”, that is to say carried out by the day, week or month to tenants who do not take up residence there;

– receipts exceed the professional income of the tax household.

Thus, all professional furnished rental companies (LMP) but also non-professional furnished rental companies (LMNP) carrying out short-term rentals are subject to professional social security contributions as soon as they withdraw income in excess of €23,000.

Seasonal rental

If you want to rent out your second home via an Airbnb-type rental platform, don’t forget the regulations: declaration to the town hall of the accommodation as furnished tourist accommodation, request for authorization to change use for cities of more than 200,000 inhabitants as well as for certain other cities…

Furnished rental and SCI: a tax trap?

Owning rental property through a company can sometimes be tax tricky. Most real estate companies formed by individuals are civil companies whose income is subject to income tax for the partners, except for the option for corporation tax. It may happen that the owners wish to rent furnished. Such a decision can have serious consequences. From a tax point of view, the SCI automatically becomes subject to corporation tax, which entails: – taxation of the unrealized capital gain observed by the SCI (the overall rate may reach 46%*); – the double taxation of rental income, with, first, a taxation of the company to corporation tax, then a taxation of the partner to income tax, at the rate of the dividends distributed. The family SARL makes it possible to exercise the activity of furnished rental company with the advantages of corporate ownership and the taxation of rents with income tax. However, this solution remains imperfect, since it assumes that all the partners are descendants in the direct line, either brothers and sisters, or married or PACS. Also, a divorce or a breach of civil partnership entails the automatic submission of the SARL to corporation tax, with the same consequences as for an SCI.

* Taxation of 36.2%, to which may be added the surcharge on high capital gains on real estate (6% maximum) and the exceptional contribution on high incomes (4% maximum).


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