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Taxation of second homes: How much tax do I have to pay?

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Taxation of second homes: How much tax do I have to pay?

For many people, second homes are synonymous with holidays, relaxation and sandy beaches, but for the tax authorities, the definition is more down-to-earth. It refers to any property you own or usufructuate that is not your main home. In other words, you don't occupy it on a regular basis and you don't have your material and professional interests there.

Owning a second home means meeting tax deadlines and paying the taxes for which you are liable. Find out our full rundown on the taxation of second homes, as well as the cases of exemption in force.

Reporting obligations

Since 2023, the tax authorities have introduced a new reporting obligation to identify the use of property. This procedure comes as part of the abolition of the taxe d'habitation for main residences, in order to determine who remains liable for this local tax.

If you owned a property on 1 January 2023, you will probably be familiar with this procedure, which involves indicating how your property is occupied (permanently, for rent, etc.). As long as your situation remains unchanged, you do not need to complete any other declarations.

If you are planning on buying a property in France, you should be aware that you will also need to complete this formality.

Local taxes and cases of exemption

Property tax on second homes

Property tax on built-up properties (TFPB) applies to any building anchored to the ground, such as a house or flat, but also a boat converted into a dwelling and used as a fixed point.

You must pay this tax if you are the owner or usufructuary of the property on 1 January of the tax year. The amount payable depends on the cadastral value of your property and the rates voted by the local authorities (commune, département, etc.).

There are several cases of temporary exemption from property tax:

- new buildings or rebuilds are exempt for 2 years;

- expenditure on energy-saving equipment is also eligible under certain conditions, for a period of three years.

Note that the exemption relating to the owner's age and income only applies to principal residences.

The taxe d'habitation or THRS

Council tax hasn't completely disappeared! It still applies to second homes, i.e. furnished premises and outbuildings that are not your main home.

Like property tax, it is based on your situation in relation to the property on 1 January of each year. The amount is calculated on the basis of the cadastral rental value and local authority tax rates.

Local authorities in densely populated areas can increase the taxe d'habitation by between 5% and 60%.

There are few cases of exemption from this local tax.

- People moving into a specialised care home are not subject to THRS on their former home.

- In rural revitalisation zones, bed and breakfast establishments or premises classified as "furnished tourist accommodation" may apply for exemption.

Tax on vacant accommodation

In reality, there are two taxes on vacant dwellings for residential use. They both relate to properties that are empty or whose furnishings do not allow them to be lived in in their current state. Here is a table summarising the characteristics of these taxes.

The Taxe sur les Logements Vacants (TLV) applies to properties that have been unoccupied for more than one year as of 1 January, and which are located in high-tension areas. The tax rate is 17% in the first year, rising to 34% in subsequent years.

The Taxe d'Habitation sur les Logements Vacants (THLV) applies to homes that have been vacant for more than 2 years as of 1 January. It applies to all municipalities except those that apply the TLV. The rate of THLV is equivalent to the rate of council tax on second homes.

There are a few specific cases in which you can avoid paying this tax:

- the vacancy is beyond your control ;

- the property is occupied for more than 90 consecutive days a year;

- major works are required;

- you already pay council tax on second homes.

The tax implications of renting out your second home

Renting out your second home is an advantageous alternative for making your property profitable, particularly during periods when the property is unoccupied. You can choose between seasonal rental or long-term rental. You also need to decide whether you want to let your property furnished or unfurnished.

Income from rental is taxable and must be declared to the tax authorities. The tax regime depends on the type of rental. Empty properties are classified as property income, while furnished properties are classified as industrial and commercial profits (BIC). Depending on the level of your income, you can take advantage of a flat-rate allowance or deduct the expenses actually incurred.

Taxation of capital gains on property sales

When selling a second home, the capital gain recorded, between the purchase price and the sale price, is taxed at the rate in force, i.e. :

- 19% income tax ;

- 17.2% social security contributions.

If you have held your property for more than 5 years, you will be entitled to a 6% allowance on income tax for each year that has elapsed, so that the capital gain is exempt after 22 years of holding the property. With regard to social security contributions, you will have to wait 30 years to be completely exempt.

Secondary residence and property wealth tax

The real estate wealth tax (IFI) concerns tax households whose net property assets are estimated to be worth more than €1.3 million. Second homes are of course included in the tax base.

To value your property, you should take its market value and deduct any related debts, such as acquisition or construction costs.

There are many different aspects to buying a second home: the search, the financing, the renovation work, etc. Tax and local legislation are also criteria to be taken into account. Our Côte d'Azur Sotheby's International Realty agents have all the necessary expertise and market knowledge to help you make a success of your property project.

Contact us to find out more