There are many investments that can reduce your income tax. This is what we call tax exemption through investment deduction. This practice consists in creating a finance charge that will be deducted from taxable income.
Many real estate investments also allow you to reduce taxes. In fact, the desire of the legislator is to promote rental investment and/or investment in overseas territories and/or to protect old buildings.
Discover in this article 4 real estate investment solutions that will allow you to benefit from tax reductions.
Girardin: property tax exemption to support economic development of overseas communities
The Girardin Act aims to encourage overseas investment. Social Girardin refers to overseas social housing programs, while classical Girardin refers to overseas industrial operations and agricultural Girardin includes investment in overseas agricultural land.
Please note that this is a one-time operation with a loss of funds with no expectation of profit. The interest in this investment lies solely in the tax advantage. In fact, the tax reduction is greater than the initial investment. Contribution rates are around 90%, meaning you put in 90 to have a tax cut of 100, so the tax benefit is 11.11%.
In return, you must remain committed for more than 5 years. Please note that in the event of a fault in the operation settings, the tax benefit may be disputed. So choose operations that offer the greatest possible guarantees.
Investing in Girardin is quite complex and project selection is key, so it may be relevant to consult a wealth management consultant to support you in this process.
Please note: Girardin benefits from a higher tax loophole ceiling of up to €18,000.
Also read:
Industrial Girardin: principles and risks
Malraux: exemption from property tax to support old buildings
The Malraux law aims to promote the renovation of old buildings. These are expenses incurred in listed buildings, designated by the Heritage Foundation or located in notable heritage buildings.
It allows you to take advantage of an income tax credit of 22% of the costs incurred on buildings located in notable historic sites, or even 30% if the investments relate to an approved Preservation and Development Plan (PSMV) or buildings, whether in old brownfields defined in of Article 25 of Law No. 2009-323 of March 25, 2009 or in the neighborhoods of the New Urban Renewal Program (NPNRU). The tax reduction increases to a maximum of 30,000 euros over 4 years.
In return for the tax reduction, the properties must be rented bare for 9 years.
Pinel: property tax exemption to promote rental investment
Pinel’s law aims to encourage the construction of new apartments in so-called “stressed” areas, meaning that housing supply is lower than demand.
Please note that if the Pinel system has been extended until 31/12/2024, the tax reduction rates are gradually reduced for acquisitions made from 2023. The reduction rate is therefore:
• 10.5% of the invested amount in 2023 and 9% in 2024 for a lease period of 6 years;
• 15% of the invested amount in 2023 and 12% in 2024 for a lease period of 9 years;
• 17.5% of the invested amount in 2023 and 14% in 2024 for a lease period of 12 years.
Please note that for the Pinel Plus system, which refers to housing in the priority district of the city policy established by Decree No. 2014-1750 of December 30, 2014; or housing meeting a high level of quality, the reduction rates are identical to those applied to the whole scheme before 1 January 2023, namely:
• 12% of the invested amount for the lease period of 6 years;
• 18% of the invested amount for the lease period of 9 years;
• 21% of the invested amount for a lease period of 12 years.
Significant increases in property loan rates and reductions in tax cuts have somewhat reduced the appeal of this tax-free investment, which remains attractive to certain profiles depending on the type of property and the area in which the investment is made.
This system falls within the total ceiling of the tax cover of 10,000 euros.
Fiscal SCPI: property tax exemption in physical and paper version
Through SCPI, it is possible to invest in real estate according to Pinel’s law, Malraux’s law or Denormandie’s law, derived from the Pinel system reserved for old housing. We are then talking about Fiscal SCPIs, a name that also includes Land Deficit SCPIs intended for investors who want to reduce their tax base made up of property income and the resulting CSG/CRDS. You own shares in a real estate portfolio invested in assets eligible for the scheme and as such you are entitled to the tax credits provided. Tax SCPIs have many advantages in addition to the tax relief allowed, you can invest with a relatively low entry fee (generally a few thousand euros compared to a few hundred thousand euros for a direct investment in real estate) and you have no administration worries. provided by SCPI managers. In return you will of course have management fees, but also subscription fees.
Please note that in order to benefit from the tax credits associated with the tax exemption scheme to which SCPI is attached, you must adhere to the planned holding period. It is always possible to sell your shares on the secondary market (with a possible discount), but then this leads to the cancellation of the obtained tax benefits and the taxpayer must return the already received tax discounts to the state.