Property Tax: How Rental Losses Are Treated for Tax Purposes

How a Property Rental Loss Is Generated

For unfurnished residential or professional properties, rental income is taxed as property income. Under the micro-foncier regime, taxable income is calculated after a flat 30% allowance, and no actual expenses may be deducted.

Under the real tax regime, landlords may deduct actual expenses such as management fees, insurance, taxes, condominium charges, interest on loans and renovation costs. This regime often applies to luxury real estate investments, where expenses are substantial.

A rental loss can only arise under the real tax regime, typically after major renovation works or when significant loan interest is involved.

How the Rental Loss Is Offset

The portion of the rental loss excluding loan interest may be offset against other taxable income (salaries, pensions, business income), up to €10,700 per year, or €15,300 for properties rented under the Cosse scheme.

Any excess loss, as well as the portion related to loan interest, may only be carried forward and offset against rental income over the following ten years.

Consequences of Offsetting a Rental Loss

When a rental loss is offset against other income, the property must remain rented until 31 December of the third following year. Failure to comply may result in a reassessment and additional tax liability.