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Taxes 2022 – How to impute your property deficit – News

If your rentals brought you less than they cost you in 2021, you can set off part of your property deficit against your other taxable income. The rest will be deductible from your rent for the next ten years.

When you rent out unfurnished accommodation, your rents are taxable as property income. Up to €15,000 in revenue per year, you come under the microfoncier regime and your taxable property income is determined by applying a 30% allowance on your revenue. Beyond €15,000, you come under the actual regime and your taxable property income is determined by deducting your actual expenses (management fees, insurance premiums, works, co-ownership charges, loan interest, property tax, etc. .). In this case, you see a deficit if your expenses are higher than your income.

Allocation to global income

Your property deficit for 2021 is chargeable to your overall taxable income for 2021 (total taxable income of your household) up to a limit of €10,700. This ceiling is increased to €15,300 if all or part of your deficit comes from accommodation rented under the Périssol or Cosse scheme. However, if you have invested on credit, the part of the deficit linked to the deduction of your loan interest is not attributable to your overall income. It will be deductible only from your rents for the next ten years, like the part of your deficit that exceeds €10,700 or €15,300.

In practice, to calculate the deficit to be set off against your overall income, you must consider that your rents primarily absorb your loan interest. Thus, if they cover them in full, it is because your deficit results entirely from your other expenses, and it will be attributable to your overall income within the limit of €10,700 or €15,300. On the other hand, if your rents only cover part of your loan interest, your deficit is partly the result of their deduction. This part can only be deducted from your rents from 2022 to 2031. Don’t panic, property income tax return no. 2044 allows you to calculate your deficit attributable to your overall income and that attributable to your subsequent rents. It also specifies the boxes of declaration no. 2042 in which you must report them.

Example. You collected €20,000 in rent, incurred €10,000 in charges and paid €23,000 in loan interest. Your deficit (€13,000) comes from your interest for €3,000 and your other expenses for €10,000. Only this fraction is chargeable to your overall income. The remaining €3,000 will be deductible from your rent for the following 10 years.

Please note that the allocation of a property deficit to your overall income for 2021 obliges you to continue to rent the property which produced it until the end of the third following year, i.e. December 31, 2024. Otherwise, the tax savings realized thanks to this imputation will be called into question and you will have to pay an additional tax. By way of exception, however, you will not be redressed if the early termination of the lease is linked to an “accident of life” (death, disability or loss of employment) or to an expropriation of the leased property.

Good to know. When you come under the microfoncier, you can opt for the real regime in order to deduct your expenses for their real amount (and note a deficit, if applicable). The option results from the deposit of a declaration n° 2044. It is valid for 3 incompressible years, then it is tacitly renewed from year to year, as long as you do not denounce it (by ceasing to deposit a 2044 and indicating your rents directly in 2042).

Deduction from subsequent rents

If your taxable property income for 2021 is profitable (your rents exceed your charges), you can reduce it by the deficits suffered during the ten previous years that you have not yet been able to deduct from your rents (they are indicated on your last notice tax). You must then first deduct your oldest deficits, which are likely to be reached first by the 10-year limit. This deduction is possible even if you are covered by the microfoncier for your 2021 rents. In this case, the tax authorities will start by applying the 30% reduction and then they will deduct your deficits that can still be carried forward.

Example. You collect €10,000 in rent per year. In 2018, you opted for the real regime in order to deduct work expenses and you noticed a deficit. You have partly charged it to your overall income for 2018 and to your rents for 2019 and 2020, but there are still €2,000 of losses carried forward. For your 2021 rents, you decide to return to microfoncier because your deductible expenses are low. Your taxable land result for 2021 (€7,000, i.e. €10,000 – 30%) will be reduced by this €2,000.

Optimization of land deficits

The property deficit chargeable to your overall income reduces your income tax base. The resulting savings depend on your marginal tax rate, ie the highest rate of the tax schedule to which your income is subject. This saving is particularly interesting if you are heavily taxed because it is not subject to the overall cap on tax loopholes, unlike most tax reductions and credits. On the other hand, the deficit attributable solely to your future property income makes it possible to reduce not only your tax but also your social security contributions.

If you have major work to do in a rented property, it may therefore be wise to do it all at once rather than spreading it out over time. In this way, you will build up a large property deficit which, once absorbed the €10,700 deductible from your overall income, will be carried forward for 10 years on your property income. You will thus achieve greater savings, both in taxes and social security contributions. If your priority is, on the contrary, to reduce your overall income subject to tax for several years, it is in your best interest to spread out your major work over time.