What is a Non-Professional Furnished Rental (LMNP)?
The Non-Professional Furnished Rental (LMNP) is a tax regime aimed at property owners who wish to rent out a 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 regime offers 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 minimal deductible expenses. It offers a flat-rate deduction of 50% on rental income, meaning you are taxed only on half of your revenues. This deduction covers all expenses and costs without the need to justify them.
The main advantage of micro-BIC lies in its simplicity. You do not need to keep complex accounts or calculate actual expenses. This regime is ideal if your expenses do not exceed 50% of your rental income. However, it becomes less advantageous if your expenditures are significant, especially in case of substantial repairs or high interest on loans.
Note that if you exceed the €72,600 threshold, you will automatically switch to the real regime, which is more suitable 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 provide 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 you believe your expenses are higher than 50% of your revenues.
Under the real regime, you can deduct various types of expenses, such as:
- Interest on loans taken out to purchase the property,
- Management fees (e.g., agency or accounting fees),
- Maintenance and repair work,
- Property taxes,
- Condominium fees,
- And importantly, the depreciation of the property and furniture, which is a powerful tax leverage. Depreciation involves deducting, each year, a portion of the property’s and furniture’s value over 20 to 30 years for real estate and 5 to 7 years for furniture.
This regime is more complex to manage, as it requires accurate accounting and often the assistance of a tax expert to calculate depreciation and declare deductible expenses. However, it is generally much more advantageous than micro-BIC for owners incurring high costs, as it significantly reduces taxable income.
Furthermore, with the real regime, it is possible to generate a property deficit, meaning that if your expenses exceed your rental income, you can carry over those losses to subsequent years for up to ten years. This mechanism allows you to offset future profits and further reduce your tax liability.
Steps to Declare an LMNP
To declare a Non-Professional Furnished Rental (LMNP), it is essential to follow several steps to remain compliant with tax laws and benefit from the tax advantages associated with this status.
1. Register with the Trade Register
The first step is to declare your activity as a furnished landlord. To do this, you must complete form P0i to obtain a SIRET number. This number is essential to formalize your activity with tax authorities. You have a 15-day window from the start of your activity to file this declaration with the Trade Register. 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 you will need 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 should report your rental receipts in boxes 5ND, 5OD, or 5PD of the form. The micro-BIC regime offers a 50% deduction, meaning you will be taxed only on half of your receipts.
- If you have opted for the real regime, your income must be declared in boxes 5NA, 5OA, or 5PA of the same form. The real regime allows you to deduct all your actual expenses, including loan interest, management fees, and property depreciation.
Managing Expenses and Depreciation
If you choose the real regime, you benefit from a significant advantage: the possibility to deduct a large number of actual expenses related to your property operation. These deductions reduce your taxable profit and, consequently, your tax obligation.
Here are the main deductible expenses you can include in your declaration:
- Management fees: These are the costs paid for managing your property, such as agency or accounting fees. These expenses are fully deductible from your rental income.
- Repairs and maintenance: All costs related to maintaining the property, repair work, or small improvements required for renting can be deducted. Examples include plumbing repairs, roof repairs, or painting.
- Interest on loans: If you took out a loan to finance the property, the interest on that loan is deductible. This is an important leverage to reduce your taxable profit.
- Condominium charges: If the property is part of a condominium, the fees paid for maintenance of common areas are also deductible.
In addition to expenses, the real regime also allows you to practice depreciation of your property and furniture. Depreciation involves spreading the deduction of the property’s and furniture’s value over several 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 portion of this value from your taxable income.
- Depreciation of furniture: Furniture provided to tenants (bed, table, appliances, etc.) can be depreciated over a shorter period, typically between 5 and 7 years.
The depreciation advantage of the real regime significantly reduces your taxable profit without any additional cash outlay. By combining expense deductions and depreciation, you can considerably optimize the fiscal management of your non-professional furnished rental activity.
Conclusion
Declaring a Non-Professional Furnished Rental (LMNP) can offer numerous tax benefits, especially if you choose the regime best suited to your situation. The micro-BIC regime is simple, but the real regime allows for greater expense deductions and better tax optimization.
