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DETAILS REGARDING LMNP STATUS
Non-professional furnished property rental (LMNP) is a tax system that allows you to build up real estate assets while benefiting from tax advantages. A rental investment in furnished accommodation, especially in a managed residence, allows you to benefit from this.
For an individual, the purchase and rental of furnished property for residential use, including in a managed residence, gives access to the status of non-professional furnished lessor, often summarized by the acronym LMNP. The fiscal framework is very interesting – here is the latest on what to know.
Who can benefit ?
The status of non-professional lessor is recognized when at least one of the following two conditions is met:
The annual revenue from this activity by all members of the same tax household is less than 23,000 euros;
These revenues are lower than the other income of the same tax household subject to income tax (salaries, pensions, other industrial and commercial profits, non-commercial profits, agricultural income, etc.).
Note: beyond these amounts, one would qualify under another status, that of professional furnished rental company, governed by other rules.
In addition, the property rented must include all the movable elements essential for normal occupation by the tenant. The decree of July 31, 2015 sets very precisely the list of furniture to be provided as a minimum. It includes, in particular, bedding with duvet and blanket, cooker/hob, a refrigerator, crockery, light fixtures, table and chairs, cleaning equipment etc....
What is the tax rule?
Unlike a classic rental, your rents are not considered as property income but are taxed according to the industrial and commercial profits (BIC) regime. Two options coexist. If your rental income does not exceed 72,600 euros per year (from 2020), you fall under the micro-BIC regime by default. A standard reduction of 50% is then applied - the balance is then taxed with your other income on a sliding tax scale.
Above 72,600 euros per year or below optionally, you benefit from the so-called “réel simplifié” or the LMNP amortization scheme. In this case, you can deduct almost all charges incurred over the year (work, loan interest, property tax, insurance, etc.), as well as potential depreciation of your property and furniture. The accumulation of all these deductions can lead to very low or no tax income for many years.
Note: if the depreciation gives rise to a deficit, the latter is attributable only to profits of the same nature without time limit.
Is this valid for managed residences?
The LMNP system is valid for managed residences, in particular those offered by “Réside Études”. In addition, if you opt for depreciation, you will be able to benefit from the reimbursement of VAT, only possible in the context of the acquisition of real estate in a serviced or tourist residence managed by a professional operator. In return, you must agree to keep the property for at least twenty years.
Can it be combined with the Censi-Bouvard scheme?
The acquisition of new furnished accommodation in a serviced residence (for students or for the elderly) entitles you to a tax reduction, called Censi-Bouvard. It is only accessible to investors benefiting from LMNP status and having opted for the ‘real regime’. In addition, you must commit to renting the property for at least nine years. In this case, you benefit from a tax reduction corresponding to 11% of the price of the property, withheld within the limit of 300,000 euros excluding tax and per year. This reduction is spread over nine years.
In return, the depreciation of the property is limited to the sole fraction of the price exceeding the limit of 300,000 euros because this does not give right to the tax reduction. For example, for an asset worth 380,000 euros, depreciation can only be calculated on 80,000 euros (380,000 - 300,000).
The choice between “classic” depreciation and the Censi-Bouvard tax reduction depends on the investor's profile and his project. Réside Études will guide you towards the most advantageous option.
What are the constraints?
Furnished rental involves more practical and administrative obligations than an unfurnished rental. Rental management in particular is more restrictive. This is the advantage of investing in a managed residence offering the services of an operator-manager who will take care of these tasks for you.
Finally, the tax return is more complex in the event of a “real” option because it is necessary to provide the tax service with a number of documents. This is why Réside Études can advise you of an accounting firm to help you complete your declaration properly.
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