The Impact of the 2025 Budget Act on LMNP Properties and Real Estate Donations

The 2025 Budget Act introduces several major changes in the real estate sector, with significant implications for property owners engaged in non-professional furnished rentals (LMNP). 

From now on, depreciation incurred during the rental period is directly deducted from the property’s purchase price, which automatically leads to a significant increase in the taxable capital gain upon sale. Specifically, if a homeowner purchases an apartment in 2002 for €500,000, spends €60,000 on renovations, and deducts a total depreciation of €290,000, their tax situation will be significantly altered. If they sell this property in 2025 for €800,000, the taxable capital gain will no longer be €300,000 as before, but will rise to €530,000, resulting in a significant increase in tax liability (from €32,520 to €57,452).

Tax-Exempt Gifts
Another significant change—one eagerly anticipated by families—is that the law introduces a substantial additional tax exemption for gifts. Parents will now be able to give their children or grandchildren up to €100,000, completely exempt from gift tax, provided that the funds are used exclusively for the purchase of a primary residence or for energy-efficiency renovations on that residence. This exemption is, however, subject to strict conditions: the funds must be used within six months of the gift, and the property purchased or renovated must be used as the primary residence of the recipient or of a tenant outside the tax household for at least five years.
 

This measure represents a major opportunity for many households seeking to make it easier for their children to buy a home while optimizing their tax situation. It could thus stimulate the real estate market—particularly in the new-construction and energy-efficiency renovation segments—by encouraging more families to make purchases or invest in renovations.
 

Furthermore, the 2025 Budget Act confirms that other tax regimes—which were under discussion but ultimately left unchanged—will remain in place, such as the flat tax, which is maintained at 30 percent, and the Real Estate Wealth Tax (IFI), whose rules remain unchanged. These elements of stability provide some visibility to investors and holders of substantial real estate portfolios, who are reassured by the absence of further changes to these closely watched tax regimes.
 

While certain tax provisions will remain unchanged for 2025, the new rules regarding the LMNP and gifts for the purchase or renovation of primary residences will profoundly reshape the wealth and tax strategies of French families, prompting everyone to carefully anticipate these changes in order to maximize their benefits and minimize their tax impact.