The Real Estate Wealth Tax (IFI) in 2023: Which French Citizens Are Affected?
According to the latest statistics from the Directorate General of Public Finance (DGFiP), in 2023, nearly 176,000 tax households were subject to the real estate wealth tax (IFI).
This figure represents a 7% increase compared to 2022. But who are the French citizens affected by this tax, and how is it calculated?
The IFI is a tax that applies to tax households whose non-business real estate assets have a net value exceeding 1.3 million euros. Taxable assets include developed properties (houses, apartments, outbuildings) and undeveloped properties (building lots, farmland), whether held directly or indirectly (for example, through a real estate investment partnership). The primary residence qualifies for a flat-rate deduction of 30%, and debts related to the properties are deductible from the gross taxable assets.
The IFI is calculated based on a progressive tax scale applied to the net value of taxable assets:
• Less than 800,000 euros: 0%
• From 800,000 to 1.3 million euros: 0.80%
• Bracket 1: from 1.3 to 2.57 million euros: 0.70%
• Bracket 2: from 2.57 to 5 million euros: 1%
• Bracket 3: from 5 to 10 million euros: 1.25%
• Bracket 4: over 10 million euros: 1.50%
The average IFI amount is 11,100 euros
Nearly three-quarters of households subject to the IFI have taxable real estate assets valued between 1.3 and 2.5 million euros. However, this category accounts for only 34.4% of IFI revenue, with an average tax payment of 5,212 euros per household. Households with real estate assets between 2.5 and 5 million euros account for more than two in ten and contribute one-third of IFI revenue, with an average tax payment of 16,900 euros. The 5% of households in the bracket above 5 million euros account for 32.4% of IFI revenue.
The primary residence accounts for a smaller share of the largest real estate portfolios. In fact, the larger a household’s real estate portfolio subject to the IFI tax, the less the primary residence (after the 30% deduction) constitutes a significant portion of that portfolio. Thus, the gross value of the primary residence (after the deduction) is estimated to average 550,000 euros for households in bracket 1 and 1.4 million euros for households in bracket 4.
Households subject to the IFI are generally older, with an average age of 70, compared with 53 for tax households subject to income tax (IR) but not subject to the IFI. Nearly 70% of IFI-subject households are over 65 years old, and 36% are over 75. Only 2.5% of IFI-subject households are 44 years old or younger. In addition, nearly 40% of IFI-subject households live in the Paris region, including 25% in Paris, 9% in Hauts-de-Seine, and 5% in Yvelines.
The sources of income for households subject to the IFI are more diversified than those of households liable only for income tax (IR). The income of households that file only for income tax consists primarily of wages and salaries (63.1%) and pensions and annuities (more than 25%). In contrast, for households subject to the IFI, income from financial assets and real estate accounts for a larger share, representing 29.4% and 12.3%, respectively, of reported income.
