The summer period is a sign that half of 2022 is behind us. So from a tax standpoint, you have a few months to find the best way to reduce your 2023 taxes based on your 2022 income! In practice, if there are many solutions, real estate is still and always will be an effective weapon to reduce taxes.
Investing in Pinel’s Law Rentals: Controlled Tax Reductions
The Pinel Tax Reduction is available to owners who commit to renting out their property for at least six years at below-market rents. More precisely, 20% lower than the tariffs practiced in the industry! In short, housing should:
- be purchased new, in a future state of completion (VEFA) or have been rehabilitated and refurbished;
- to be naked, that is, without furniture;
- to be rented only as the main place of residence;
- be in a collective building and in an area where the relationship between supply and demand for housing is considered close (A bis, A or B1);
- comply with a certain level of energy efficiency in accordance with the BBC 2005, RT 2012 or RE 2020 standards;
- be completed within 30 months of commencement of work and delivered within 12 months of delivery;
- be rented to tenants whose tax households comply with the resource ceilings set by the Pinel law – vary depending on the area in which the property is located.
Of course, these are real restrictions in terms of investment. However, they allow you to enjoy a nice income tax discount: 12% for six years of rent, 18% for nine years and 21% for 12 years, calculated in relation to the purchase price of your property (if it is new), or the purchase price and work performed in case of rehabilitated property. According to the Pinel law, your investment in real estate must not exceed 300,000 euros per year and per tax family, as well as 5,500 euros per m2. This represents a tax exemption of up to EUR 63,000 on a purchase of EUR 300,000.
Please note that in 2023 and 2024, Pinel’s law changes and becomes even more complicated!
In 2023 and 2024, the tax reduction rates that allow you to use the Pinel system will change. And it’s down! 2022 is indeed the last year to be able to use the Pinel system as it exists. Starting January 1, 2023, the current Pinel will be replaced by a reduced rate Pinel and Pinel+. Each will be subject to different conditions. In both cases, the tax reduction will always depend on the duration of the lease obligation as well as the DPE (energy efficiency diagnostics) of your investment. As a result, in 2023 only objects of class not lower than B (according to RE2020 standards) will be eligible for a tax reduction.
A notable feature of Pinel+ is that it will allow you to keep your tax cut up to 21% if and only if you meet three new conditions in terms of ecology and comfort. Know :
· Mandatory double exposure for T3 or more.
· Minimum living area depending on the type of housing.
· Mandatory exterior for Tier 3 and above
With the Censi-Bouvard system, there are fewer restrictions and tax cuts of up to 11%.
Extended to December 31, 2022, the Censi-Bouvard has everything to like compared to the Pinel device. And for good reason, the latter offers a nice tax reduction without any restrictions on geographic location, rent, or limiting the resources of tenants! In practice, the Censi-Bouvard system is designed for individuals who wish to invest in a furnished apartment located in a serviced residence (student residence or senior residence). The property must be new, entrusted to the residence manager and rented under LMNP status (non-professional furnished tenant) for at least nine years. If this status limits your rental income to €23,000 per annum and 50% of your total family income, it allows you to enjoy a tax credit equivalent to 11% of the pre-VAT price on the purchase of your property(2). Example: For a property valued at €300,000 (the maximum allowed real estate investment each year), your tax credit will be €33,000 over nine years. This will allow you to receive an annual deduction of €3,666 on your taxes.
Bonuses A: In 2022, Censi-Bouvard still allows you to enjoy the benefits of LMNP status. Translation? This allows you to recover 20% VAT on the purchase price of your newly furnished property. An additional tax benefit that, when added to the 11% tax reduction mentioned above, allows you to save 31% on the value of your investment! And the icing on the cake: residences managed in the same way as Réside Études – a benchmark company for over 30 years – can reach up to 3.90% pre-tax/tax in return(1).
- The rate proposed as of 07.01.2022, on the amount of the real estate, excluding VAT, of the investment, in accordance with the commercial lease offered by the manager and in accordance with the available stocks.
- Legal notices: Subject to the provisions of the current Financial Law (Senzi-Bouvard Law). These tax savings apply to any new purchase of a residence with student or senior services operated by a professional operator and eligible for this status. The tax savings equivalent to 11% of your investment, excluding VAT, cannot exceed EUR 300,000.
AGAINSTContent created in collaboration with Réside Études. No BFMTV editorial staff contributed to this content.