At the heart of the tax reforms planned for 2025, the taxation of real estate capital gains is attracting particular attention. Investors and owners are preparing for a potential upheaval that could influence their profitability calculations and asset management decisions. The proposed measures are part of a context where the legislature seeks to combine tax fairness and adaptation to economic developments. Real estate capital gains, a central concern, will undergo structural adjustments, particularly for properties rented as furnished non-professional rentals (LMNP) and, more broadly, for sales of land and buildings. The reforms, far from being purely technical, have direct consequences on future taxes, the management of deductible expenses, and tax returns. Furthermore, these developments are accompanied by questions regarding professional practices, particularly for notaries, who are involved in calculating and collecting capital gains tax. The proposed tax changes affect both the method of assessing capital gains and the associated deduction and exemption arrangements. These changes particularly concern the calculation of the purchase price, which is now included in the depreciation deducted during the rental period for LMNP properties, which significantly increases the tax base. At the same time, the upcoming general reform aims to gradually eliminate deductions proportional to the length of ownership, replacing them with an update of the purchase price according to inflation, a measure designed to improve economic coherence but likely to impact sales taxation.
In short, these open proposals call for a new approach to real estate tax optimization, encouraging owners and investors to anticipate, adjust their strategies, and study the implications for their rental yield and future taxation. In light of this development, a thorough understanding of the practicalities and improved tax preparation are essential assets to take advantage of these changes in an increasingly demanding environment.
New tax rules for real estate capital gains under LMNP (Local Real Estate Investment Fund)
Owners of properties rented out as furnished non-professional properties (LMNP) are directly affected by the measures introduced in the 2025 Finance Bill. The reform profoundly changes the calculation of real estate capital gains by incorporating a key concept: the reintegration of depreciation deducted during the ownership of the property. This tax innovation calls into question the traditional method of assessing the purchase price used to calculate capital gains. More specifically, whereas previously the purchase price was the price paid plus acquisition costs and renovation expenses, the new rule now subtracts from this amount all depreciation recorded during the furnished rental period. This mechanism results in a higher tax base and, consequently, increased taxation upon resale. However, this change does not apply to all types of property—in particular, student residences, nursing homes, and senior residences are exempt from this measure, protecting certain specific niches.
This tax overhaul thus has several concrete implications:
A direct increase in capital gains tax upon resale for traditional LMNP (real estate investment property) properties.
Systematic consideration of depreciation, even when the property is rented out unfurnished after the LMNP period, confirming deferred and higher taxation.
- An increased requirement for precise accounting monitoring to justify previously deducted depreciation amounts, crucial for calculating the exact tax base. Aspect Before 2025 reform
- After 2025 reform
- Calculation of the purchase price Purchase price + costs + work Purchase price + costs + work – depreciation deducted
| Properties concerned | LMNP without distinction | Exclusion of student residences, nursing homes, and senior residences |
|---|---|---|
| Impact on taxation | Lower | Higher |
| Investors must therefore anticipate these new rules to avoid being surprised by a higher tax bill upon sale. Proper management of deductible income and expenses related to furnished rentals is becoming an essential optimization lever for controlling real estate capital gains. To better understand these changes, it is recommended to explore specialized content such as those offering tax optimization for real estate sales on this site. | Discover everything you need to know about capital gains tax on real estate in France, including rules, exemptions, and tips for optimizing your tax situation when selling your property. | |
| Impact of the reform on the taxation of real estate capital gains outside the LMNP (real estate investment fund) | Beyond the furnished rental sector, the tax rules relating to real estate capital gains are also undergoing a broader review, applying to all categories of land and buildings. One of the major announcements as part of the 2025 reform is the gradual elimination of tax allowances based on ownership duration. | Until now, individuals benefited from progressive tax reductions on the amount of capital gains as the length of time they owned their property increased. These reductions allowed for a complete exemption from income tax after 22 years and from social security contributions after 30 years, which clearly encouraged longer ownership cycles. |
This practice, however, presented disadvantages for the market and the quality of the real estate stock: A tendency to keep properties in a poor state of repair, often for long periods, hampered by the prospect of tax exemption.A certain rigidity hindering the fluidity of real estate transactions, penalizing the rapid changes necessary for appropriate market dynamics.
Previous tax allowance system
New proposed system
Tax allowances proportional to the ownership period
Single tax allowance based on a discounted purchase price
- Total income tax exemption after 22 years
- Calculation taking inflation into account, regardless of the ownership period
Social security contributions exemption after 30 years
| Phased elimination of these exemptions | The objective is twofold: to ensure fairer taxation and to encourage active management of real estate assets. Owners will therefore have to review their property preservation strategy, taking this important change into account. This trend toward greater tax realism is confirmed by several specialized analyses of US real estate markets showing similar developments, available here. |
|---|---|
| https://www.youtube.com/watch?v=i_6s2kSMAhI | Practical issues: reporting obligations and capital gains calculation |
| The reform of the tax system for real estate capital gains involves significant adjustments to tax reporting and the calculation of tax upon sale. Notaries, the main stakeholders responsible for collecting capital gains tax, will face increased requirements. | First, the complexity stems from the need to reconstruct an accurate history of depreciation deducted and deductible expenses that have impacted the property since its acquisition, sometimes over several decades. This reconstruction is all the more crucial for properties under LMNP (Loan-Purchase Lease) where depreciation now plays a central role in the calculation. |
| The major questions for professionals are: | How to obtain and verify the authenticity of the accounting data provided by the seller? |
What tools should be implemented to automate depreciation tracking and value updating? How can fluctuations in the tax regime be managed in the event of changes in the property’s use, such as a transition from furnished to unfurnished rental?The situation anticipates future administrative clarification, but the reduced deadline already requires increased attention during transactions. Owners and investors are encouraged to retain all supporting documents and work with specialized accountants to anticipate their obligations. Mastering tax reporting can become a key lever, both to limit the tax base and to ensure regulatory compliance.
Obligation before reform
Additional requirements to be expected
Justification of purchase price
Invoices, acquisition costs, work
- Adding depreciation history
- Tax return
- Standard classification of capital gains
In-depth calculation taking depreciation into account
| Notary involvement | Collection of tax payment | Complex calculation and verification of amounts |
|---|---|---|
| To support this transition, innovative guidance and tools, such as | platforms dedicated to real estate sales management | , are becoming increasingly important in supporting sellers and professionals in the sector. Find out everything you need to know about the taxation of real estate capital gains in France. Learn about tax rates, possible exemptions, and strategies to optimize your real estate tax situation. |
| Tax implications for investors under the micro-BIC and real estate tax regimes | The reform impacts both the micro-BIC and real estate tax regimes, eliminating the illusion of a tax difference in real estate capital gains. Although the income management and reporting methods are distinct between these two regimes, depreciation deducted in both cases will now be taken into account in the calculation of capital gains. | In practice, the micro-BIC regime, which applies a flat-rate deduction of 50 to 71% (depending on the type of rental) to determine taxable income, cannot escape this reintegration. The administration considers that this flat-rate reduction already implicitly includes the depreciation carried out. Thus, upon sale, they will be formally reintegrated into the taxable base, which levels out taxation between the two regimes and creates a homogeneous but more restrictive tax package. |
| Actual diet: | precise detail of income and expenses, including depreciation explicitly deducted. | Micro-BIC: |
lump sum deduction considered to take into account depreciation. Consequence:same tax increase on real estate capital gains in the event of resale of the property.
https://www.youtube.com/watch?v=nC6-RX2VsOI
Evolution of reductions and exemptions on the duration of holding
In the general context of the planned tax transformations, the allowances for holding periods, until now considered a pillar of tax relief for real estate capital gains, are strongly called into question. The period necessary to claim total exemption remains unchanged in appearance, but will see its regime evolve considerably.
- Indeed, the gradual elimination of proportional allowances calls for a more refined and realistic calculation that takes inflation into account rather than simply the duration. This means a shift toward a conditional exemption that is less strictly dependent on the holding period, but more dependent on the present economic value of the property. The income tax exemption will be retained after 22 years, but will now be accompanied by a present value analysis.
- The social security contribution exemption will be maintained after 30 years, with a possible adjustment to its application. A gradual reduction in allowances between 2025 and 2030, a period during which it will be crucial for sellers to plan their transactions.
- This revision encourages a rethink not only of the choice of holding period, but also of all the tax optimization methods available today, before the new rules come into effect. Appropriate strategies avoid excessively high tax burdens while preserving the overall return on real estate assets. Ownership period Current allowance
Changes with reform
0%
Phased elimination of allowances
6-21 years
- Progressive allowances
- Replacement by a single updated allowance
- 22 years and over
Full exemption
| Maintained under adjusted conditions | Effects on property tax and real estate asset management | While property tax is not directly part of real estate capital gains, it remains an unavoidable expense in real estate asset management and can indirectly influence investment profitability. In 2025, real estate players must reassess their expense forecasts to fully incorporate the consequences of tax reforms. |
|---|---|---|
| Local taxes, included in property tax, may undergo parallel adjustments, which would impact the accounts of owners, particularly those with multiple rental or private properties. Anticipating these expenses is essential to maintain an accurate view of actual profitability and expected income. | Property tax remains a fixed expense to be included in the annual tax return. | Potential local increases, in line with municipal financing needs, can increase the overall tax burden. |
| Optimized management of deductible expenses, particularly maintenance and renovation costs, allows for adjustments to income tax. | A comprehensive approach that integrates capital gains, property tax, and rental income is therefore necessary for effective asset management, ensuring a financial balance conducive to the smooth management of real estate investments. To explore these topics in more depth, consulting resources dedicated to credit improvement and real estate financing may be helpful, such as this specialized portal: | Improving Your Mortgage |
| . Strategies to Adopt in the Face of Real Estate Capital Gains Reform | In light of the new tax provisions, a review of real estate investment strategies is essential. Industry professionals recommend several approaches to limit the tax impact and maintain profitability: | 📈 |
Extend the holding period
to fully benefit from retained exemptions while taking into account inflation adjustments.
🏡
- Evaluate the relevance of the donation
- before the sale to reduce the impact of the taxable capital gain while maintaining control over the assets.
- 🔍
Optimize accounting management by ensuring accurate tracking of depreciation and deductible expenses, essential for calculating the capital gain.💼
Get support from a tax expert to adapt your investment plan to the new rules and consider the best personalized solutions.
Furthermore, anticipating the impact of future rules on upcoming transactions allows you to identify windows of opportunity, particularly before the gradual implementation of the reforms starting in 2026. This active preparation helps you secure your assets and manage your future income. Strategy
- Tax Impact Practical Advice Extend the Holding Period
- Lower Tax on Long-Term Capital Gains Plan the Resale Based on Exemption Thresholds Donate Before the Sale
- Reduce the Taxable Base Consult a Notary to Secure the Transaction Strictly Monitor Depreciation
- Clarify and Optimize the Calculation Use Dedicated Software and an Accountant Personalized Tax Advice
Optimization Tailored to Each Profile
| Meeting with a Tax Specialist | To learn more and learn about the steps to follow to successfully complete a real estate sale in this context, useful resources are available online, including this comprehensive article. | Outlook for the Real Estate Market and Investment Returns |
|---|---|---|
| The announcement and gradual implementation of tax reforms related to real estate capital gains are expected to reshape market behavior. Anticipated effects include: | 🎯 | Increased short-term sales |
| before the new rules are implemented, in anticipation of tax anticipation. | ↗️ | Changes in investment returns |
| in light of increased capital gains taxation, leading to a revaluation of wealth management strategies. | ⚖️ | Increased tax transparency |
| promoting better consideration of real economic factors in tax calculations. | 🏢 | Adaptation of the real estate portfolio |
to meet higher expectations in terms of maintenance and investment efficiency. https://twitter.com/GuiSimonin/status/1726511097958547597Expected Effect
Description
Impact on Stakeholders
- Temporary supply shock Increase in sales before reform Opportunity for buyers and sellers
- Reduction in net yield Increase in capital gains tax Rental investors
- Greater tax fairness Updating of purchase prices Owners and tax authorities
- In a changing environment, it is becoming crucial for every real estate stakeholder to closely monitor these reforms and adapt their asset management, particularly by taking into account the impacts on the tax declaration of rental income and expense management. Frequently asked questions about the taxation of real estate capital gains in 2025 What is the main tax change regarding capital gains in LMNP (low-cost housing) properties? The reintegration of depreciation deducted during the rental period into the calculation of taxable capital gains.
| Yes, the depreciation history must be presented for a compliant and accurate calculation. | Will the deductions for holding periods be completely eliminated? | They will be gradually replaced by a single deduction calculated on a discounted purchase price. |
|---|---|---|
| How does the reform impact the micro-BIC and actual tax regimes? | Both regimes will be affected by the reintegration of depreciation into the calculation of capital gains. | Is property tax affected by the reform? |
| Indirectly, property tax remains a significant expense to consider in the overall management of real estate assets. | ||