Here we are at the beginning of the year, the perfect time to take stock of how the 2018 finance bill will affect the real estate tax system. What are the changes and how will they impact the real estate market? Read on to find out.
The ISF will become the IFI
One of the major changes to the 2018 finance bill will be the introduction of the Real Estate Wealth Tax (Impôt sur la Fortune Immobilière, IFI) which will replace the Wealth Tax (Impôt sur la Fortune, ISF). From now on only real estate assets worth more than 1.3 mn euros will be taken into account with this new tax. The scale, the tax rate, the 30% deduction for a primary residence and the exemption for properties considered professional properties will remain unchanged. But few landlords should be affected by these changes. However, it could encourage investors to move towards shareholdings instead of housing and could unfortuntately be an obstacle for real estate investment.
Micro Bic: Increased thresholds
The 2018 finance bill will also increase the thresholds to benefit from the Micro-Bic system (for revenue for 2017). They will increase:
- from 33, 200 € to 70, 000€ a year for furnished rentals (excluding furnished rentals for tourists)
- from 82, 000 € to 170, 000€ a year for listed furnished rentals for tourists and for guesthouses
This change will allow more tenants in furnished rentals to benefit from this very simple tax regime (thanks to its 50% lump-sum allowance). Nevertheless, it’s important to note that in 85 % of cases the Régime Réel has more tax advantages since it allows you to write off the property, as well as the furnishings and appliances, and to deduct all the charges related to activity as a landlord of a furnished rental. To find the best tax system for you, check out the free simulator offered by the website jedeclaremonmeuble.com.
Increase for CSG
From the 1st January 2018, the Generalized Social Contribution (contribution sociale généralisée, CSG) will increase 1.7%, increasing social security charges for capital income to 17.2% (instead of 15.5%).
This change will impact income from both furnished and unfurnished rentals, but will not affect landlords’ rental options.
Exemption from Real Estate Contributions for Businesses
Another change due to the 2018 finance bill will be that from 2019 turnover or rental income less than 5,000€ will be exempt from real estate contributions for businesses. But this change will not affect many landlords, since the majority generate rental income above this limit.
The changes due to the 2018 finance bill will have little impact on the tax system for furnished, and should provide a certain stability. Good news for investors!