Tourist rental: which regime to choose for income tax return?

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ADVICE – Baptiste Bochart, a lawyer at rental income specialist jedeclaremonmeuble.com, describes the two main tax regimes in effect in 2023 that apply to tourist rental income.

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If this is not the only question we ask ourselves when considering renting furnished tourist accommodation, it is certainly the most important. And to make the right choice, it is important to keep several points in mind!

How does the taxation of income from the rental of furnished furniture work?

Furnished rental income is treated as industrial and commercial profits (BIC), which gives you a choice between two tax regimes: the so-calledmicro-BIC“and”real mode» taxation. Each of these regimes has its own tax mechanisms that determine the amount of your taxable income. From this result, your tax will then be calculated based on your highest marginal tax rate. So it all comes down to the best way to reduce your taxable income to reduce your taxes.

What is the micro-BIC diet?

This is the regime that non-professional furnished rental companies often join by default or in the absence of advice when announcing the activity. This mode works according to the flat-rate reduction mechanism. It is clear that you declare the amount of your annual income, including fees, to the tax authorities, who are then responsible for applying a flat-rate deduction, the rate of which depends on the type of rental. However, for the rental of furnished tourist accommodation, this rate has recently been revised downwards as a result of the Finance Bill 2024. It used to be between 50 and 71%, but now there is no reduction of more than 30% for furnished tourist accommodation, except for some special ones. cases, in which it can rise up to 51%.

What is the real regime for short-term rental of furnished furniture?

There is no reduction in real mode. However, in return, you benefit from the mechanism of deduction of expenses and depreciation. Simply put, you can deduct from your income all the expenses related to renting the equipment: taxes, subscriptions, various invoices, insurance, real estate fees, accounting fees, etc. The list is long. And in the case of an investment, if the date of commencement of activity corresponds to the date of purchase of the property, notary fees and real estate agency commissions are also deductible.

In addition, you can also write off the value of the furniture present in the accommodation, the work done and the premises themselves. In other words, you deduct a fraction of the home’s value from your tax result each year.

In most cases, the sum of these deductions significantly reduces your tax result, or even reduces it to 0, meaning you pay very little, if any, tax. And this benefit can last over time, as any amount that is not deductible in the year it is created can be carried forward to subsequent years’ profits, within a 10-year limit for the deficit created by fees, and indefinitely. for depreciation.

How to choose the right diet?

You will often need to use your calculator to do this. In short, if the total expenses you incur for your activity are less than the amount of reduction provided by the micro-BIC scheme, the latter will often be the most beneficial. This may be the case, for example, if you have owned the property for a certain number of years and do not plan to carry out any work, or if you use it for your own vacation, for example. Otherwise, real mode will often be preferred. You can also use a simulator to make it easier.

When to choose a tax regime?

You choose the tax regime for the first time when you register your activity, but this does not mean that you cannot change it later. However, you will have to be careful about the term conditions. To switch from the micro-BIC regime to the real regime, which is the most common change, you will have to send the application of the option letter to the tax administration by the end of May of the year to which the change applies, i.e. May 2024 for income received in 2024, even though it will not be taxed until 2025. This calendar error is common among lenders who want to switch from micro-BIC to the real regime.

However, given the changes that have taken place this year, missing that deadline could be particularly damaging. Also note that in some cases you won’t have a choice. So if you exceed the income ceiling of the micro-BIC regime, which from the 2024 Finance Act is €15,000 for furnished tourist accommodation, you automatically fall under the real regime. The same applies if the property is co-owned.

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