This New IFI Rule You Absolutely Need to Know

The 2024 Finance Act introduced a new provision for the Real Estate Wealth Tax (IFI) to prevent abuse by certain taxpayers and to harmonize the legislation.

This measure, proposed by Christine Pirès Beaune, the representative for Puy-de-Dôme, aims to establish guidelines for debt deductions for taxpayers subject to the IFI who have formed a corporation.
 

Previously, households subject to the IFI that owned real estate through a corporation could deduct virtually all of the corporation’s debts. Effective January 1, 2024, only debts related to real estate assets subject to the IFI may be deducted.
 

This change to the IFI affects approximately 90,000 households, or nearly one in every two households subject to this tax (175,980). When filing their IFI returns, these households will therefore need to adjust their calculation method and may potentially face a higher tax bill, as certain debts can no longer be deducted.
 

Debts related to owned real estate will still be deductible, as will related expenses such as renovation costs, property tax payments, and monthly mortgage payments. However, debts unrelated to properties subject to the IFI will no longer be deductible starting with the tax return filed in 2024.
 

This measure will also standardize the rules governing debt deductions, since individual homeowners subject to the IFI were already unable to deduct debts not related to their real estate assets. Finally, it should help increase the amount of tax revenue generated by the IFI, which totaled 1.9 billion euros in 2023—an increase since its creation in 2018 but still less than the revenue generated by the ISF in 2017 (approximately 4 billion euros).