France’s non-professional furnished rental tax regime, known as LMNP, enters a more selective phase in 2026 under recent French finance legislation. The rules alter long-standing tax advantages for property investors by factoring depreciation deductions into property resale values.
Finance Law Reforms Alter Property Resale Calculations
The French finance law introduced significant changes for property sales completed on or after February 15, 2025. Accountants Alexandre Gex and Jocelin Rivoire report that depreciation deductions claimed by LMNP landlords under the real tax regime (“régime réel”) now factor directly into real estate capital gains calculations. These deductions reduce the acquisition price used to determine taxable capital gains, with specific exceptions for properties located in serviced residences.
This adjustment ends a previous tax asymmetry that allowed investors to lower their taxable income through depreciation without those same amounts reducing their cost basis upon sale. Investors must now weigh annual tax savings against potential tax liabilities at the time of exit.
Stricter Thresholds for Unclassified Tourist Rentals
The micro-BIC regime, which offers simplified tax reporting for furnished rentals, faces tightening restrictions specifically targeting short-term tourist accommodations. For unclassified furnished tourist rentals, the revenue threshold drops to 15,000 euros, and the tax allowance shrinks to 30 percent starting with the 2025 tax declarations.
Real Regime Mechanics and Ongoing Profitability
Despite stricter regulations, the LMNP status retains core economic advantages for investors targeting long-term tenants such as students, young professionals, and mobile workers. Properties equipped for immediate occupancy often generate higher rental yields than comparable unfurnished rentals in areas with sustained housing demand.
The real tax regime continues to allow landlords to deduct loan interest, management fees, insurance, property tax, maintenance expenses, and depreciation from rental income. Accountants note that maximizing these deductions can heavily reduce or neutralize annual taxable income, provided landlords maintain the property over a decade or more.
Administrative Complexity and Compliance Requirements
Operating under the LMNP real regime involves rigorous administrative obligations. Landlords must file a complete tax package (“liasse fiscale”) and establish an annual balance sheet. Calculating property depreciation requires tracking individual building components across varying timelines while separating non-depreciable land values.
Additional operational hurdles include managing indivision rules during joint purchases, tracking depreciation limits under Article 39 C of the French General Tax Code, and handling potential value-added tax rules for parahotel services or specialized housing like student residences and nursing homes ("Ehpad"). Experts advise professional accounting support to manage these compliance demands and oversee transitions between LMNP and professional furnished rental status (“LMP”).
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