French Property Taxes for Non-Residents and Expats

If you are one of the lucky souls who own property in France as a US citizen, this guide has everything you need to know about French property taxes for non-residents and expats.

Overview of French Property Taxes

France’s property tax system is governed at the national and local levels. At the national level, the system encompasses various types of taxes, each targeting different aspects of property ownership. This includes:

• Income tax on rental earnings
• Capital gains tax on property sales
• Wealth tax (for high-value properties)

Local councils also have significant influence over property taxes. Rates can vary heavily in different regions, meaning that property owners may face significantly different tax burdens depending on the property’s location.

Types of Property Taxes in France

Income Tax on Rental Income

If you rent out a property in France, the rental income you receive is subject to income tax. Non-residents pay income tax at a flat rate of 20% on income up to €28,797 and 30% for higher amounts. There are certain deductions available that can help reduce the taxable amount, including:

• Maintenance expenses
• Property management fees
• Interest on loans taken to purchase the property

Rental income must be declared annually, and failure to do so can result in penalties.

Capital Gains Tax (Impôt sur les Plus-Values)

Non-residents selling property in France are subject to capital gains tax, which applies to the profit made from the sale of real estate. As of 2024, the standard capital gains tax rate for non-residents is 19%. However, an additional 15.5% in social charges applies to these gains for non-EU residents. Exemptions and reductions may apply, especially for properties owned for extended periods. (More on that below!)

Wealth Tax (Impôt sur la Fortune Immobilière – IFI)

The French wealth tax, known as the impôt sur la fortune immobilière (IFI), applies to the worldwide real estate holdings of residents and to French properties owned by non-residents. Non-residents are liable if the net value of their French real estate exceeds €1.3 million. IFI follows a progressive rate structure, ranging from 0.5% to 1.5%, depending on the total value of your taxable real estate.

Various deductions can lower your IFI liability, such as the outstanding principal on a mortgage.

Local Property Taxes (Taxe Foncière and Taxe d’Habitation)

Local property taxes are a significant part of owning property in France. The two primary local taxes are taxe foncière and taxe d’habitation, each serving different purposes.

• Taxe foncière is paid annually by the property owner, regardless of whether the property is occupied or rented out. It is based on the notional rental value of the property, which local authorities adjust annually to account for inflation and regional differences. In 2024, there is a general increase of at least 3.9%, with some areas seeing additional hikes based on local council decisions.
• Taxe d’habitation, historically levied on all properties, was abolished for primary residences starting in 2021. However, it still applies to second homes, with some regions imposing additional levies to combat housing shortages. As of 2024, more than 2,200 communes are eligible to add a surcharge of 5% to 60% on second homes, depending on local housing needs.

Stamp Duty (Droit de Mutation)

When purchasing property in France, buyers are responsible for paying stamp duty, known as droit de mutation, which is typically included in the closing costs. The rate varies based on the age of the property and the department where it is located.

• Older properties (over five years old) incur a stamp duty of 5.8%.
• Newer properties are taxed at a lower rate of 0.7%, plus a 20% value-added tax.

These taxes are typically folded into the notary’s fees, which also cover administrative costs, including land registration and mortgage arrangements.

Tax Exemptions and Reductions

France offers a variety of tax exemptions and reductions for both residents and non-residents, which can significantly reduce the financial burden of property ownership.

Primary Residence Exemption for Wealth Tax (IFI)

One of the most substantial tax reductions available is the exemption for your primary residence from the IFI. If the property is your main residence, 30% of its market value can be deducted from the total amount considered for the IFI. This rule applies even to non-residents, as long as the property serves as their primary home while they are in France.

Exemptions for Rural, Historical, and Special Properties

Several exemptions exist for properties that meet specific conditions, such as rural land, woodlands, or historical monuments. Forest land, for example, may qualify for a partial or full exemption under specific forestry management plans. Additionally, properties with cultural or historical significance can receive significant tax breaks if they are protected under French heritage laws.

Newly Constructed Properties

New constructions enjoy an exemption from taxe foncière for the first two years following completion. To take advantage of this exemption, property owners must notify the tax authorities within 90 days of the property’s completion.

Mortgage Interest Deductions for Wealth Tax

For properties subject to wealth tax (IFI), owners can deduct the outstanding balance of mortgages or loans used to purchase or improve the property. This includes both principal mortgages and loans for construction or renovation.

While mortgage interest payments are not deductible, the outstanding loan balance can reduce the property’s net taxable value, potentially lowering your IFI liability.

Exemptions from Taxe d’Habitation for Primary Residences

As of 2021, taxe d’habitation was abolished for primary residences, meaning that residents no longer need to pay this tax on their main home. However, non-residents who own second homes are still required to pay this tax. In some areas, local councils have introduced additional surcharges on second homes, particularly in regions facing housing shortages.

Reductions for Long-Term Ownership (Capital Gains Tax)

Non-residents can also benefit from reductions in capital gains tax based on the length of time they have owned a property.

• Properties held for more than 22 years are exempt from capital gains tax.
• Properties owned for over 30 years are exempt from both the capital gains tax and social charges.

There are additional reductions available for properties sold for under €15,000 or those sold as part of specific inheritance or gifting scenarios.

Other Special Exemptions

Certain properties used for commercial purposes, such as those rented under the Loueur Meublé Professionnel (LMP) scheme, may qualify for partial or full exemptions from IFI, provided the rental income constitutes a significant portion of the owner’s overall income. Properties held by para-hotelier businesses, which rent out furnished properties on a short-term basis, can also benefit from exemptions.

Filing Requirements and Deadlines

Owning property in France requires non-residents to follow specific tax filing procedures to ensure compliance. These obligations vary depending on the types of taxes involved, including income tax on rental earnings, capital gains tax, and local property taxes. Here’s a detailed breakdown of the filing requirements and deadlines for each.

Income Tax on Rental Income: May or June

If you earn rental income from a property in France, you are required to report it on your annual tax return. For non-residents, rental income is typically declared via Form 2042, specifically through Form 2042-C, which is used to report foreign property income. The filing deadline for non-residents varies depending on where you are located:

• For residents of Europe, the filing deadline is typically in late May.
• For non-European residents, the deadline is usually early June.

IFI: June 1

The IFI must be declared along with your annual income tax return, usually by June 1 of each year. To declare this tax, non-residents use Form 2042-IFI.

Capital Gains Tax: Within 30 Days of Sale

When selling a property in France, non-residents must declare any capital gains within 30 days of the sale. The process involves submitting Form 2048-IMM to the French tax authorities. Non-residents are also required to appoint a fiscal representative if the sale price exceeds €150,000, although certain exceptions apply for residents of EU and EEA countries.

Local Property Taxes

Local property taxes in France, including taxe foncière and taxe d’habitation, are due annually.

• Taxef bills are typically sent out in September or October, and the payment is due in full by October 15.
• Taxe d’habitation (for second homes) is due by November 15th, with the exact deadlines varying by region.

Both taxes can be paid via direct debit, online, or by check. For non-residents, paying online is usually the most convenient (and reliable) method.

Filing for Exemptions and Reductions

To benefit from exemptions or reductions, such as those for newly constructed properties or forest land, non-residents must apply for them when filing their tax returns. For example, new constructions are exempt from taxe foncière for the first two years, but property owners must notify the tax authorities within 90 days of the property’s completion.

Failing to apply within the deadline means losing out on the exemption.

Common Mistakes (And How to Avoid Them)

Failing to Declare Rental Income

One of the most common mistakes made by non-resident property owners is neglecting to declare rental income. In France, rental income is subject to income tax, and failing to report it can lead to penalties, including fines of up to 80% of the undeclared amount.

Some property owners incorrectly assume that if the rental income is minimal or if they rent to family or friends, it does not need to be declared. However, all rental income, no matter the amount, must be reported.

How to avoid: Keep accurate records of all rental transactions, including leases, payments, and expenses. Use the correct tax form (Form 2042-C) to declare the income and seek help from a tax professional to ensure full compliance.

Missing Filing Deadlines

Property tax deadlines in France are strict, and missing them can result in hefty penalties. Whether it’s for taxe foncière, taxe d’habitation, or the IFI, failing to file or pay on time results in interest charges of 0.2% per month and additional penalties of up to 10% of the total amount due.

How to avoid: Mark your calendar with the critical filing dates. Typically, property taxes are due in October and November, while IFI and income tax filings must be submitted by June 1 each year. Consider setting up direct debits or online payments to ensure you never miss a deadline.

Incorrect Valuation for IFI

A common issue for non-residents liable for the French wealth tax is incorrectly valuing their property. Underestimating the value can result in back taxes, penalties, and interest if the French tax authorities reassess the property’s value. Overvaluing, on the other hand, means paying more tax than necessary.

How to avoid: To accurately assess the property’s value, consider using a local expert or licensed appraiser. Keep documentation of any renovations or improvements that could impact the value. Also, be sure to apply allowable deductions, such as the outstanding mortgage principal.

Not Appointing a Fiscal Representative for the Capital Gains Tax

If you’re selling a property in France and the sale price exceeds €150,000, French law requires you to appoint a fiscal representative to handle the capital gains tax declaration. Non-compliance can delay the sale and result in fines. (EU residents are generally exempt from this requirement, but non-EU residents must follow the rule strictly.)

How to avoid: Hire a qualified fiscal representative early in the sale process to avoid any complications. Your notary can help facilitate this appointment.

Failing to Claim Available Exemptions and Deductions

Many non-residents overlook valuable exemptions and deductions that could reduce their overall tax liability. For example, failing to notify the tax authorities about newly constructed properties could lead to missing out on the two-year taxe foncière exemption.

How to avoid: Keep up to date with available tax exemptions and reductions by consulting a tax advisor or regularly reviewing French tax law changes. Timely and proper application for exemptions is crucial to maximizing your savings.

Incorrectly Reporting Property Use for Taxe d’Habitation

For non-residents with second homes in France, taxe d’habitation still applies. Some property owners mistakenly claim their second home as a primary residence to avoid the tax, but this can result in significant penalties if caught by the authorities.

How to avoid: Be transparent about the status of your property. If it’s a second home, make sure you are correctly reporting it to avoid future penalties. You may still be eligible for partial exemptions or reductions if the home is used seasonally.

FAQs

Do I have to pay both taxe foncière and taxe d’habitation?

Yes, if the property is your second home. Taxe foncière is always due, while taxe d’habitation only applies to second homes.

Can I deduct my mortgage interest from the French wealth tax?

No, only the outstanding principal balance of loans used to acquire or improve the property is deductible from the wealth tax.

Do non-residents pay inheritance tax on French property?

Yes, non-residents are subject to inheritance tax on property located in France. The rate depends on the relationship between the deceased and the beneficiary, with direct descendants benefiting from more favorable rates compared to distant relatives or unrelated individuals. Inheritance tax can go up to 60% in the most extreme cases.

How does France treat rental income from short-term rentals (Airbnb, etc.)?

Rental income from short-term leases, such as Airbnb, is subject to French tax, just like other rental income. Non-residents must declare this income, and it may also be subject to local occupancy taxes (taxe de séjour), which are typically charged to tourists.

Are there any recent changes to local property taxes in France for 2024?

Yes, in 2024, taxe foncière is set to rise by at least 3.9%, with some local councils applying additional increases. Additionally, more than 2,200 communes are eligible to impose surcharges on second homes to address housing shortages. These surcharges range from 5% to 60%, depending on the local council’s decision.

Can a non-resident own property in France?

Yes, non-residents can legally own property in France, just like any French citizen. France’s real estate market is open to all, regardless of nationality. There are no restrictions on foreign ownership.

How else can I avoid double taxation in France?

For US citizens who own property in France, avoiding double taxation is a key concern. Fortunately, several tax breaks and exclusions are available to help minimize your tax burden:

• Tax Treaty: The US and France have a tax treaty designed to prevent individuals from being taxed on the same income by both countries. This treaty clarifies which country has the right to tax certain types of income, helping ward off double taxation.
• Foreign Earned Income Exclusion (FEIE): The FEIE allows US taxpayers living abroad to exclude a certain amount of their foreign-earned income from US taxation. For 2024, the exclusion is up to $126,500. While this exclusion only applies to income from employment or self-employment, it helps reduce overall taxable income, which can reduce other tax liabilities.
• Foreign Tax Credit: The Foreign Tax Credit allows you to offset your US tax liability with the income taxes paid to France. For example, if you pay capital gains tax or income tax on rental income in France, you can claim these amounts as a credit against your US taxes.
• Foreign Housing Deduction or Exclusion: If you are a US citizen living in France, you may also qualify for the Foreign Housing Deduction or Exclusion, which allows you to deduct (or exclude) certain housing expenses from your taxable income. Qualifying expenses include rent, utilities, and maintenance costs.

By leveraging these tax breaks and tax treaty provisions, non-residents can significantly reduce or even eliminate the risk of being taxed twice on the same income. Consult a tax professional who understands both US and French tax laws to ensure you don’t pay more than you owe.

Get Help with Your US Taxes with Greenback!

At Greenback Expat Tax Services, we understand the challenges of living abroad and navigating multiple tax systems. Our team of highly experienced CPAs and IRS Enrolled Agents specializes in expat tax preparation. Whether your taxes are straightforward or messy, we’ll ensure they’re done right, providing you with the peace of mind you deserve.

Contact us today to schedule a consultation, and let us do the heavy lifting for you. With our transparent, flat-fee pricing and Make It Right guarantee, you’ll know exactly what to expect, without any hidden surprises. You’ll have one-on-one access to your dedicated accountant, ensuring personalized service every step of the way.