Three Scenarios for Real Estate Capital Gains: What Does the Tax Debate Say?

As part of the parliamentary discussions on the 2025 budget bill, the taxation of real estate capital gains is sparking heated debate. Three key measures, still under review, could profoundly reshape the tax landscape for property owners and real estate investors. An in-depth look.
 

1. Inflation Indexation and Adoption of the “Flat Tax”
An amendment proposed by Jean-Paul Mattei calls for an overhaul of the system of holding-period deductions. The idea would be to calculate taxable capital gains by adjusting the property’s acquisition value for inflation, rather than applying progressive deductions. At the same time, taxation would be subject to a 30% “flat tax” (including 12.8% income tax and 17.2% social security contributions), simplifying the current tax schedule.
This reform would maintain the exemption for primary residences but would take effect in 2026 for building lots and in 2027 for existing properties. While it aims to curb land hoarding, it could nevertheless lead to a wait-and-see attitude in an already fragile real estate market.
 

2. Targeted Taxation of Quick Resales of Primary Residences
Another amendment, championed by Peio Dufau, aims to curb abuses related to “speculative flipping.” It proposes to tax capital gains on primary residences resold within five years of purchase—a notable exception under current tax law. Exemptions are being considered for sales motivated by family, medical, or professional reasons.
While this measure remains marginal in terms of tax revenue, it marks a turning point by challenging the “tax haven” status of the primary residence.
 

3. Rebalancing the Ratio of Furnished to Unfurnished Rentals
The tax treatment of rental property investors is also under scrutiny. A provision initially included in the bill proposes to reinstate deducted depreciation into the taxable capital gains base for non-professional furnished rentals (LMNP). This would significantly increase the tax burden in the event of a resale.
Although rejected in a vote in the National Assembly, this measure could still be reintroduced via Article 49.3. Investors are criticizing its potentially retroactive impact and are calling for a grace period to allow them to adjust.
 

A Market Under Strain
If adopted, these reforms could shake up a real estate market already weakened by inflation and rising interest rates. Caught between a desire for tax fairness and fears of a supply shock, the 2025 Budget could mark a turning point for French homeowners and investors. Stay tuned for the final verdict in late December.