IFI: Real Estate Assets Exempt from the French Wealth Tax

Professional Real Estate Assets Outside the IFI Scope

Real estate used for professional purposes is exempt from IFI.
This exemption applies to properties necessary for conducting an industrial, commercial, agricultural, liberal or craft activity and owned by a member of the tax household (taxpayer, spouse, or dependent children).

To qualify, two key conditions must be met:

• the property must be directly linked to the professional activity,

• and it must be used exclusively for that activity.

The activity itself must be conducted as a primary occupation, meaning it is regular, consistent, and profitable, and must generate more than 50% of the household’s professional income.
 

Exemption for Professional Furnished Rental Activities (LMP)

Properties used for professional furnished rentals (LMP – Loueur en Meublé Professionnel) can also be exempt from the IFI, under specific conditions.

To qualify as a professional landlord, the owner must:

• earn annual rental income exceeding €23,000,

• and ensure these rental revenues represent more than 50% of the household’s total professional income.

When these thresholds are met, the furnished rental properties are excluded from the IFI tax base, offering a significant advantage for investors managing substantial rental portfolios.
 

Tax Optimization Strategies for IFI Taxpayers

Property owners subject to the IFI can adopt strategic wealth management solutions to reduce their taxable real estate base.
One common and effective method is temporary usufruct transfer — a donation of usufruct to family members, typically children.

This strategy allows the owner to retain bare ownership (nue-propriété) while transferring the usufruct (right to collect rent) for a limited period.
During that time, the usufructuary bears the tax liability, and the property is excluded from the owner’s taxable assets.

If the usufructuary is not subject to the IFI, the property becomes fully exempt from wealth taxation, making this a highly efficient estate planning tool for families with significant real estate holdings.