Property tax exemption

Unlike the purchase of a rented flat in an old building, for many years now rental investments in new buildings have been able to benefit from advantageous tax deductions.
The current arrangement is as follows:

Pinel Law: tax reduction and rental investment

1. Invest in a new home with RT 2012 or BBC 2005 certification.
2. Rent your property for 6, 9 or 12 years.
3. Benefit from a tax reduction of 12%, 18% or 21% of the price of the property acquired.

Conditions to benefit from the tax exemption

1. Building zones
2. Rent limit
3. Resource limits for tenants
4. Main residence of the tenant

Since 1 January 2015, thanks to the Pinel scheme, the tax advantage has been maintained in the case of rental to an ascendant or descendant (parent(s) or child(ren) not attached to the tax household).

The tax advantage

21% tax reduction on the cost price of the property
if the flat is rented for 12 years.
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18% tax reduction on the cost price of the property
if the flat is rented for 9 years.
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12% tax reduction on the cost price of the property
if the flat is rented for 6 years.
UP TO €63,000 IN TAX SAVINGS*.
Calculated on the amount of the investment

The tax reduction is calculated on the cost price of the operation limited to €300,000
Up to a highest rent per square metre equivalent to €5,500

The cost price is the sum of the acquisition and the costs related to the acquisition: notary's fees, commissions paid to intermediaries, value added tax, registration fees, if any, and land registration tax.

The Duflot-Pinel scheme can only apply to two investments per year for the same tax household (the date of signature by the notary being taken as proof).

Transaction can be carried out in joint ownership or SCI
Effective rental within twelve months of completion
Excluded from this are transactions involving the dismemberment of property.

Rents

To be eligible for the LOI PINEL real estate scheme, you must comply with rent limits that are revised each year.

MONTHLY DUFLOT PINEL RENT LIMITS IN €/M².

Please note:

The PINEL rent limit is the maximum amount your PINEL property can be rented for.
The B2 zone is subject to a prefectoral agreement to be eligible for the DUFLOT PINEL law.

Multiplier coefficient PINEL law

The rent is calculated after applying a Pinel law multiplier which is calculated as follows

S being the surface area of the dwelling: 0.7 + 19/S
The result is rounded to the nearest two decimal places and may not exceed 1.2.
This multiplication coefficient takes into account the reality of the rental market, the rent being lower, the larger the area is.

Example of a rental under the PINEL law:

For the purchase of a new 40m² home in Paris in the Abis zone, the limit per m² will be €16.72.
The calculation to be made is therefore: 16.72 x (0.7 + 19/40) = 19.64.
The price of the rent under the Pinel law is then equal to : 40 x 19,64 = 786 €.

Resource limits

Rents are capped, in order to allow access to renting for the most modest households, who must, in return, respect the income conditions.
By resources, we mean the reference tax income. It is shown on the income tax notice for the year preceding the year in which the contract is signed.

Example for the purchase of a property with a cost price of €205,000

Acquisition and delivery in 2015: 18% reduction (9 year rental conditions)
205,000 x 18% / 9 years = €4,100/year for 9 years from 2015 income tax
That is a tax saving of €36,900 over 9 years

Taxation of property income

If land deficit: Amount chargeable x TMI = Tax savings

Land deficits (positive or negative) resulting from expenditure other than loan interest may be deducted from the total income of the following six years up to an annual limit of €10,700.

The fraction of the deficit that cannot be deducted from overall income (fraction exceeding €10,700 and fraction corresponding to loan interest) can be deducted from the property income of the following 10 years.

Investing in the Duflot Pinel law

To make an appointment with a real estate advisor, discover all the advantages of the (DUFLOT) PINEL law and construct a free simulation of your rental investment, contact us using our contact form.