LMNP: Major Changes in the Calculation of Depreciation

Since 2025, a controversial new tax measure has been shaking up the furnished rental sector in France: the reinstatement of depreciation in the calculation of real estate capital gains. 

Adopted following a chaotic legislative process and despite heated parliamentary debates, this provision now applies to non-professional furnished rental property owners (LMNP).
 

In practical terms, depreciation—which until now has been tax-deductible to account for the wear and tear on real estate—will now have to be added back into the calculation of capital gains in the event of a sale. This reinstatement automatically increases the taxable base, potentially leading to a significant increase in capital gains tax—set at 19 percent—to which 17.2 percent in social security contributions is added.
 

According to an analysis by JD2M and ELM Conseil, however, this measure does not apply to all landlords. There are still numerous exemptions: transfers without consideration (gifts, inheritances), the sale of a primary residence, or reinvestment in a primary residence under certain specific conditions. Furthermore, managed residences (such as nursing homes and student housing) are fully exempt from this new rule, unlike tourist accommodations.
 

Another nuance is that only depreciation actually deducted under the actual income tax regime is included, thereby excluding—for now—the micro-BIC regime. According to Stefano Demari, president of JD2M, this distinction could paradoxically benefit the micro-BIC regime, despite the fact that it is often criticized.
 

Despite these adjustments and exemptions, some fear that this provision may affect the tax appeal of the actual tax regime under the LMNP. However, as the study points out, the annual tax deduction allowed by depreciation remains far greater than the negative impact of the reinclusion upon sale, especially when taking into account the progressive deductions linked to the length of time the property has been held.
 

Finally, Stefano Demari expresses concern about the message this sends to investors amid chronic fiscal instability, highlighting a potential deterrent effect that could be detrimental to the real estate sector and its stakeholders, particularly small property owners.