Apartment undergoing renovation, works eligible for the property tax deficit scheme

TAXATION

Property tax deficit: reduce your tax bill by renovating a rental property

Eligible works, deduction cap, conditions to meet: understand a tax mechanism particularly well suited to older properties in need of renovation.

What is the property tax deficit?

A property tax deficit arises when, for an unfurnished property let under the actual tax regime, the amount of deductible expenses (works, loan interest, co-ownership charges, property tax, insurance, management fees) exceeds the rent received during the year. This deficit can then be deducted from the household's overall income, reducing income tax.

Good to know: the property tax deficit only applies to unfurnished letting under the actual regime. It does not apply to furnished lettings, which are taxed as business income (see our article on furnished-rental status).

Which works are eligible?

Only certain types of works qualify for the property tax deficit. The distinction is essential:

Eligible works

Repair, maintenance and improvement works that do not alter the structure of the property: roof renovation, electrical upgrades, insulation, facade restoration, boiler replacement, bathroom renovation, etc.

Excluded works

Construction, reconstruction or extension works that create new habitable space or alter the building's structure: these fall under a different tax treatment and are not deductible as expenses.

The cap on deduction against overall income

The property tax deficit that can be deducted from overall income is capped at €10,700 per year. Beyond this amount, or where overall income is insufficient, the excess deficit can be carried forward against rental income for the following ten years.

The conditions to meet

The property must be let unfurnished and the income declared under the actual regime (not the simplified regime).
The property must remain let (or be put up for letting) for the 3 years following the deduction of the deficit against overall income.
Supporting documents for the works (invoices, quotes) must be kept for the full relevant period in case of a tax audit.

Why this mechanism is relevant on the French Riviera

The Riviera market includes a significant proportion of older buildings, particularly in the historic centres of Nice, Villefranche-sur-Mer or Antibes: properties with high growth potential once renovated, and particularly well suited to a property tax deficit strategy for investors in higher tax brackets.

This article is for general information purposes only and does not constitute personalised tax advice. As every situation is specific, we recommend consulting an accountant or tax adviser to assess your project.