As the owner of one or more properties, you will likely need to carry out certain repairs or renovations. Whether these are for a rental investment or your primary residence, the costs can often be high. However, there are many aids available that can significantly reduce your expenses. Tax credits, reduced VAT rates, or property deficit – we explain everything in detail!
Rental Investment
When renting out your property, you can benefit from the "property deficit" system. This allows landlords to take advantage of the expenses incurred on rental properties. For this, the total expenses must exceed the rental income. Additionally, you must personally pay for the renovation costs. You can either hire an external company or do the work yourself. However, be sure to keep all receipts and invoices.
Note that the maximum amount deductible from taxes is €10,700 per year. Any excess can be carried over for the next 10 years. Keep in mind that the property deficit only applies to income and expenses from unfurnished rentals, as furnished rentals fall under the BIC regime.
The eligible works under this scheme are:
- Maintenance and repair works: These are works aimed at maintaining or restoring a property to its original condition. This includes electrical installation, plumbing, heating systems, and even roof renovations.
- Improvement expenses: These refer to works that generally introduce a new or improved feature suited to modern living conditions. Examples include installing a sewer system, security system, or elevator.
Primary Residence
For your primary residence, unfortunately, maintenance, repair, extension, or improvement works do not provide any tax benefits.
However, there is an exception for disabled or elderly people, who may benefit from a "tax credit for aid to persons." This offers a 25% reduction on the expenses incurred to finance specific accessibility and safety equipment. For all the conditions, click the following link.
Energy Renovation Works
If you plan to improve your home for environmental reasons, MaPrimeRénov', previously known as the Energy Transition Tax Credit (CITE), will be very helpful. This new scheme, implemented on January 2, 2020, allows you to receive a grant of up to €20,000 over five years to finance various energy renovation works.
Eligible works under this scheme include interior wall insulation, installation of high-performance gas boilers, double-flow ventilation systems, or electric vehicle charging stations (full list available here).
The grant is calculated based on your income and the type of work. Additionally, like the CITE, this aid can be combined with other grants (Action Logement, local government aid, etc.). For the remainder of 2020, only low-income households can benefit from this grant. However, it will be available to everyone starting in 2021.
If you are not part of this household category and want to start these works as soon as possible, good news: you don't have to wait! You can still opt for the CITE, which remains temporarily available.
Like the new grant, the Energy Transition Tax Credit is valid if the renovation work is carried out by an approved craftsman. The CITE amounts to 30% of the expenses, with a ceiling of €8,000 for a single person and €16,000 for a couple.
For more details, click here.
Reduced VAT Rates
Another way to reduce your costs is by benefiting from reduced VAT rates for homes that have been completed for more than two years (as of the start of the work). A VAT rate of 10% (instead of the usual 20%) applies to improvement, transformation, fitting, and maintenance works that are not considered construction or extension work. Meanwhile, energy improvement works benefit from a 5.5% VAT rate under article 278-0 bis A of the General Tax Code.
To benefit from the reduced VAT rate, the work and equipment must be invoiced by a company. If you purchase the materials yourself, the 10% rate will only apply to the installation cost by the company.
Feel free to visit the government website, where you’ll find all the information about tax-deductible works: www.impots.gouv.fr
