How To Pay Less Tax by Investing in New?

Reduction of notary fees, temporary exemption from property tax or even tax exemption… Investing in new construction has many tax advantages. We will explain to you.

The Pinel Law for Rental Investments

Do you have savings and are looking to invest? You are probably already considering real estate, considered by far the safest investment for 80% of French people. But have you thought about new real estate? Indeed, it can allow you to pay less taxes, but it is not the only advantage!

First, you have to know what a new home is… To be considered as such, the home must have been built for less than five years, have never been inhabited, nor sold by its first owner. But it can also be an old dwelling that has benefited from in-depth renovation work, especially on its structure.

Individuals, who invest in a collective residential property, will be able to take advantage of the states without property tax system, set up in 2015. To take advantage of it, it will be necessary to commit to renting the accommodation as a main residence for a minimum period of six years old.

The habitat must also be located in a “tense” geographical area in terms of rental supply and demand. These areas where supply is not sufficient to meet demand and where the Pinel law therefore applies are areas Abis, A and B1. 

With the Pinel law, you save 21% of the price of the property on your taxes if you rent accommodation for 12 years, 18% if you rent it for 9 years and 12% for a rental of 6 years. The total amount of the reduction may not exceed €63,000. Note, however, that this tax exemption will be gradually reduced from 2023 until the end of 2024, when Pinel will give way to a new version, Pinel +.

From January 1, 2023, the tax reduction will therefore increase to 10.5% of the acquisition price for a rental over 6 years, 15% for a rental over 9 years and 17.5% for a commitment over 12 years. It should also be noted that since July 1, 2021, tax exemption is reserved only for apartments. It is therefore no longer possible to benefit from it for the purchase or construction of a detached house. 

The Censi Bouvard Law

This law, known as LMNP Bouvard, concerns only service residences for seniors or students. To benefit from it, you have to fidi apartments for rent in these residences and commit to renting it furnished. In addition, the property must be rented for at least 9 years. Thus, you benefit from the status of LMNP and therefore from a tax reduction.

The interest of this device is to benefit both from a tax reduction of 11%, but also from additional income. In addition, after 20 years, you will fully recover the VAT! 

The Malraux Device

Voted in 1962 and reformed in 2016, the Malraux system is intended to preserve the architectural heritage, while reducing the cost of restoration work by  up to 30% of the price. Thus, this device is intended for old properties that have undergone such heavy structural work that they are again considered as new.  

The amount of the tax exemption depends on the real estate area where the accommodation is located. It is therefore particularly advantageous for those who invest in the historic city center. Be careful however, the rates are 22% or 30% depending on the location of the property and the type of valuation provided. In addition, the amount of work is capped at $400,000 for a period of four consecutive years.

The Girardin Law

In addition, by investing in the DOM-TOMs, you benefit from the Girardin law (former Paul law) or the Duflot law overseas. The latter offers a tax reduction in new real estate up to 29% and $9,600 per year, for 9 years. 

The LMNP, for Lessors of Furnished Property

The status of non-professional furnished rental company (LMNP) is intended for owners renting a furnished property as a main or seasonal rental. It also concerns accommodation located in a residence managed with services: residence for tourism, business, for students, for seniors, etc.

Thanks to the deduction of charges, the LMNP allows you to take advantage of rental income with little or no tax. But to be eligible, rental income must not exceed 50% of tax household income or $23,000 including tax per year. Moreover, taxation is not part of the category of property income, but that of industrial and commercial profits (BIC).  

Reduced Notary Fees

Another advantage of buying new: notary fees represent only 2 to 3% of the price of the property! In the old one, on the other hand, these costs are 7 to 8%. This is therefore a first level of non-negligible savings.

This is because 80% of these fees are taxes paid to the state. However, most of these taxes do not apply to new real estate, which explains why the costs of acquiring the property are considerably lower. 

And An Exemption from Property Tax

In a new purchase, you can sometimes benefit from an exemption from your property tax. To take advantage of this, you must declare the completion of the housing work within 90 days. This property tax exemption will be valid for two years, from the following January 1st. 

It should be noted, however, that this exemption is not applied by all cities. It depends on the municipalities or inter municipalities. Some choose, for example, to reserve this property tax exemption for home buyers benefiting from an assisted loan.

It may also be decided to grant only a partial exemption. The municipality can limit the exemption due to it up to a percentage of between 40% and 90% of the taxable base, in increments of 10%.