Unlike income from unfurnished rentals, which is included in real estate income, earnings from furnished rentals are categorized as Industrial and Commercial Profits, which have considerably more tax benefits. Landlords of furnished rentals have the choice between the current tax system and the Micro BIC system to declare their rental income. Let’s look at the advantages of the Micro BIC system more closely…
Declaring with Micro BIC: what are the conditions?
If you rent a furnished property and your annual revenue (= rents collected – addition income, such as a grant for maintenance work for example) is not over 33 200€, the Micro BIC system is the best for your tax return.
If you haven’t rented your property throughout the whole year, you’ll have to adjust your income in line with how long it was rented out for. As an example, if you began your activity as a landlord of a furnished rental on the 1st October, you could choose to file your tax return with the micro BIC system if your rental profits don’t exceed 8,300€ (=33,200€/ 12 months x 3 months of activity).
What is the tax rate for income declared through micro BIC ?
Income from furnished rentals are subject to Income Tax in your tax bracket, after applying a lump-sum deduction of 50 %, which is supposed to cover costs linked to your rental activity.
Rental earnings are then subject to social security contributions at the current rate of 15.5 %, which will increase to 17.2 % from the 1st January 2018.
For example, if you earn 16,200€ a year from renting out your furnished property and if your tax rate is 30 %, you will have to pay taxes of: (16,200€ x 50% x 30%) + (16,200€ x 50% x 15.5%), ie. 3,685.50€.
You should know: if your property is classed as a furnished rental for tourists, the threshold to be able to use the Micro BIC system is 82,200€ and the lump-sum deduction is 71%! To find out more about furnished rentals for tourists, read my article “Meublé de tourisme” ratings: how properties are classified.
Simple administrative steps…
The Micro BIC system doesn’t need any particular accounting skills. Landlords for furnished rentals only need:
- An accounts book, summing up all of the times the property has been rented out over the year (the name of the tenant, dates, rent paid)
- Information on all expenses (furniture, appliances, maintenance work, etc.) and the amount, the date, the name of the supplier and the type of purchase
To declare your rental income, you just need to enclose your tax return, the 2042CPRO additional revenue form, in which you’ll have stated, on page 2 in the “Non-professional furnished rentals” section, your total rental income (box 5ND; or NG for furnished rentals for tourists).
The Micro BIC system is attractive for many landlords of furnished rentals, thanks to its simplicity and especially since the finance bill for 2018 should increase the thresholds for the Micro BIC system (70,000€ a year; 170,000€ a year for furnished apartments for tourists).
However, it is a good idea for non-professional landlords of furnished rentals to compare both possible tax systems, since although the Micro BIC system is simple to use, the current system most often allows for the biggest tax savings. To make the best choice, don’t hesitate to use our free online simulator on the jedeclaremonmeuble.com website.
Find my article Furnished rentals: the simplicity of the Micro-BIC system on the Revenu website (in French).