What is a Non-Professional Furnished Rental (LMNP)?
The Non-Professional Furnished Rental (LMNP) is a tax regime intended for property owners who wish to rent out furnished property while benefiting from tax advantages. This status applies if 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 real regime. Each presents different advantages based 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 owners with few expenses to deduct. It offers a flat deduction of 50% on rental income, meaning you are taxed only on half of your revenues. This deduction covers all expenses and costs without requiring proof.
The main advantage of the micro-BIC lies in its simplicity. You do not 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 attractive if your expenses are high, especially with significant renovation costs or high interest on loans.
Note that if you exceed the €72,600 threshold, you will automatically switch to the real regime, which is better suited for investors with high expenses.
The Real Regime
The real regime is another tax regime offered for non-professional furnished landlords. Unlike micro-BIC, it does not offer a flat deduction but allows deduction of 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 you believe your expenses are greater than 50% of your revenues.
Under the real regime, you can deduct several types of expenses, such as:
- Interest on loans taken out for the property purchase,
- Management fees (e.g., agency fees, insurance),
- Maintenance and repair work,
- Property taxes,
- Condominium charges,
- And especially, depreciation of the property and furniture, which is a powerful tax lever. Depreciation involves deducting, each year, a part of the property’s and furniture’s value over 20 to 30 years for the property and 5 to 7 years for furniture.
This regime is more complex to manage, requiring strict bookkeeping and often the assistance of a chartered 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 can significantly reduce taxable income.
Additionally, with the real regime, it is possible to generate a fiscal deficit, meaning if expenses exceed rental income, you can carry forward those losses to future years, up to ten years. This mechanism helps neutralize future profits and further reduce your taxation.
Steps to Declare a LMNP
To declare a Non-Professional Furnished Rental (LMNP), it is essential to follow several steps to ensure compliance with tax laws and to benefit from the tax advantages associated with this status.
1. Register with the Commercial Court Registry
The first step is to declare your furnished landlord activity. You must complete 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 15 days from the start of your activity to submit this declaration to the Commercial Court Registry. This step is mandatory for all owners wishing to engage in non-professional furnished rental.
Once completed, you will receive your SIRET number, necessary for all future tax declarations.
2. Declare your Rental Income
Each year, you must declare your rental income to the tax authorities. This is done via form 2042 C PRO, an extension of the standard income declaration.
- If you are under the micro-BIC regime, you must report your rental receipts in boxes 5ND, 5OD, or 5PD. The micro-BIC regime offers a 50% deduction, meaning you will be taxed only on half of your receipts.
- If you choose the real regime, your receipts should be declared in boxes 5NA, 5OA, or 5PA of the same form. The real regime allows you to deduct all actual expenses, including loan interest, management fees, and property depreciation.
Management of Expenses and Depreciation
If you opt for the real regime, you benefit from a significant advantage: the possibility to deduct numerous actual expenses related to your property management. These deductions help reduce the amount of your taxable profit and, consequently, your tax liability.
Here are the main deducible expenses you can include in your declaration:
- Management fees: These are expenses paid for managing your rental property, such as agency or accounting fees. These are fully deductible from your rental income.
- Repairs and maintenance: All costs related to maintaining the property, repair work, or minor improvements needed for rental can be deducted. This includes plumbing repairs, roofing work, or painting.
- Loan interest: If you took out a loan to finance the purchase, the interest on that loan is deductible. This is an important lever to reduce your taxable profit.
- Condominium charges: If the property is part of a co-ownership, the charges paid for common area maintenance are also deductible.
In addition to expenses, the real regime also allows you to perform the depreciation of your property and furniture. Depreciation involves spreading the deduction of the property’s and furniture’s value over multiple years, as their value diminishes over time.
- Depreciation of the property: The value of your property is depreciated over 20 to 30 years. Each year, you can deduct a part of this value from your taxable income.
- Furniture depreciation: Furniture provided to tenants (bed, table, appliances, etc.) can be depreciated over a shorter period, typically between 5 and 7 years.
The depreciation is a key advantage of the real regime because it allows for a significant reduction in taxable profit without additional cash outlay. Combining expense deductions and depreciation can greatly optimize the fiscal management of your non-professional furnished rental activity.
Conclusion
Declaring a Non-Professional Furnished Rental (LMNP) can offer numerous tax advantages, especially if you choose the regime that best suits your situation. The micro-BIC regime is simple, but the real regime allows for more expenses to be deducted and better tax optimization.
Further information
