What is a Non-Professional Furnished Rental (LMNP)?
The Non-Professional Furnished Rental (LMNP) is a tax regime aimed at owners who want to rent out a furnished property while benefiting from tax advantages. This status applies if the rental income does not exceed a certain ceiling.
Applicable Tax Regimes in LMNP
When deciding to rent a property under the Non-Professional Furnished Rental (LMNP) status, it is crucial to understand the available tax regimes. Indeed, taxation can significantly impact your net income. Two options are available: the micro-BIC and the actual regime. Each regime has different advantages depending on your rental income and expenses.
The Micro-BIC Regime
The micro-BIC (Industrial and Commercial Profits) regime is accessible if your annual rental income is below €72,600. This regime is particularly attractive for landlords with few expenses to deduct. Indeed, it offers a 50% flat-rate deduction on rental income, meaning you are taxed only on half of your receipts. This deduction covers all expenses without needing to justify them.
The main advantage of the micro-BIC is its simplicity. You don’t need to keep complex accounts or calculate actual charges. This regime is ideal if your expenses do not exceed 50% of your rental income. However, it becomes less advantageous if your costs are significant, especially in case of extensive work or high-interest loans.
Note that if you exceed the €72,600 threshold, you will be automatically switched to the actual regime, which is more suitable for investors with high expenses.
The Actual Regime
The actual regime is another tax regime available for non-professional furnished landlords. Unlike micro-BIC, it does not offer a flat-rate deduction but allows you to deduct all actual expenses related to the rental activity. This regime becomes mandatory if your rental income exceeds €72,600, but you can also voluntarily adopt it if your expenses are higher than 50% of your receipts.
Under the actual regime, you can deduct several types of expenses, such as:
- Loan interest paid for property purchase,
- Management fees (e.g., agency fees, insurance),
- Maintenance and repair work,
- Property taxes,
- Condominium charges,
- And importantly, depreciation of the property and furniture, which is a powerful tax lever. Depreciation involves deducting, each year, a portion of the property’s and furniture’s value over a period of 20 to 30 years for real estate and 5 to 7 years for furniture.
This regime is more complex to manage because it requires keeping strict accounts and often the help of a professional accountant to calculate depreciation and declare deductible expenses. However, it is generally much more advantageous than micro-BIC for owners with high expenses, as it significantly reduces the tax payable.
Furthermore, with the actual regime, it is possible to generate a property deficit, meaning if your expenses exceed your rental income, you can carry forward these losses to future years, for a maximum of ten years. This mechanism allows you to offset future profits and thereby further decrease your taxation.
Steps to Declare an LMNP
To declare a Non-Professional Furnished Rental (LMNP), it is essential to follow several steps to comply with tax regulations and take advantage of the tax benefits associated with this status.
1. Register with the Court Registry
The first step is to declare your activity as a furnished landlord. To do this, you must fill out form P0i, which will allow you to obtain a SIRET number. This number is essential to formalize your activity with the tax authorities. You have a 15-day window from the start of your activity to submit this declaration to the Court Registry. This step is mandatory for all owners wishing to operate a non-professional furnished rental activity.
Once completed, you will receive your SIRET number, which will be necessary for all future tax declarations.
2. Declare Your Rental Income
Each year, you must declare your rental income to the tax authorities. This declaration is made using form 2042 C PRO, an extension of the standard income declaration.
- If you are under the micro-BIC regime, you should report your rental receipts in boxes 5ND, 5OD, or 5PD of the form. The micro-BIC regime offers you a 50% flat deduction, meaning you will be taxed only on half of your receipts.
- If you have opted for the actual regime, your receipts must be declared in boxes 5NA, 5OA, or 5PA of the same form. The actual regime allows you to deduct all your actual expenses, including loan interest, management fees, and depreciation of the property.
Managing Expenses and Depreciation
If you choose the actual regime, you benefit from a considerable advantage: the ability to deduct many actual expenses related to the operation of your property. These deductions allow you to reduce the amount of your taxable profit and consequently your tax burden.
Here are the main deductible expenses you can include in your declaration:
- Management fees: These are fees paid for managing your rental property, such as agency or accounting fees. These costs are fully deductible from your rental income.
- Repairs and maintenance: All costs related to maintaining the property, repair works, or small improvements necessary for renting can be deducted. This includes plumbing repairs, roofing, or painting.
- Loan interest: If you took out a loan to finance the property, the interest on this loan is deductible. This is an important lever to reduce your taxable profit.
- Condominium charges: If the property is part of a condominium, charges paid for common area maintenance are also deductible.
In addition to expenses, the actual regime also allows for property depreciation and furniture depreciation. Depreciation involves spreading the deduction of the property’s and furniture’s value over several years, as their value diminishes over time.
- Real estate depreciation: The value of your property is depreciated over a period of 20 to 30 years. Each year, you can deduct a portion of this value from your taxable income.
- Furniture depreciation: Furniture provided to tenants (bed, table, appliances, etc.) can be depreciated over a shorter period, generally between 5 and 7 years.
The depreciation is a key advantage of the actual regime because it significantly reduces your taxable profit without additional cash outflow. By combining expense deductions and depreciation, you can greatly optimize the tax situation of your non-professional furnished rental activities.
Conclusion
Declaring a Non-Professional Furnished Rental (LMNP) can offer many tax benefits, especially if you choose the regime that best fits your situation. The micro-BIC regime is simple, but the actual regime allows for greater expense deductions and better tax optimization.
