Real estate tax reduction allows investors to lower their taxes while building a sustainable asset. The current schemes offer attractive tax benefits for the purchase of new or old properties intended for rental. Our guide details the different options available in 2025, from the Denormandie law to the Loc’Avantages program, to help you choose the strategy best suited to your situation and asset goals.
Fundamentals of Real Estate Tax Reduction
Principles and Mechanisms of Tax Benefits
The tax reduction mechanisms operate according to three main principles: expense deduction, property depreciation, and tax credits. A property owner can deduct expenses from their global income through property deficit by carrying out energy renovation works.
Depreciation allows furnished rental owners to reduce their taxable base by annually deducting a portion of the property's purchase price. This option is particularly suitable for highly taxed individuals.
The choice of tax regime depends on the location of the property, the amount of rent received, and the owner's tax level. For example, an apartment in a high-demand area rented under the Loc'Avantages program can generate a reduction of up to 65% of rental income.
Who Can Benefit from Tax Reductions?
French taxpayers domiciled in mainland France can access tax benefits related to rental investment. Among the different types of real estate purchases, this opportunity is especially aimed at taxable individuals wishing to grow their property assets.
Landlords with properties intended for long-term rental are the main beneficiaries of these schemes. The rental must comply with a minimum duration of 6 years to maximize tax benefits.
Investors must also meet specific criteria: acquisition of new or old housing depending on the scheme, rent ceilings, and tenant selection based on income levels. Personalized support proves valuable for optimizing the project and choosing the most suitable scheme.
General Eligibility Conditions
The success of a tax reduction project depends on compliance with strict technical and environmental standards. The property must meet energy class A and conform to the RE2020 requirements to ensure optimal performance.
The acquisition must take place in specific geographic areas, notably those with high rental demand or city centers targeted by revitalization programs. The property must belong to a collective housing building, excluding detached houses even in joint ownership.
Tenant selection is subject to income ceilings set by law, while rents must remain below local market prices. A rental commitment of 6 to 12 years ensures the sustainability of the project and maximizes tax reductions.
Overview of Tax Reduction Schemes in 2025
The Scheduled End of the Pinel Law
December 31, 2024, marked a major turning point in the history of French real estate tax reduction with the end of the Pinel scheme. Only investors who signed their reservation before this date benefit from an additional period until March 31, 2025, to finalize their purchase.
This government decision reflects a new approach to supporting the rental real estate market. Tax reductions of up to 21% over 12 years are being replaced by alternatives like LMNP status or the Denormandie law.
Buyers who have already invested under the Pinel regime retain their tax benefits until the end of their commitment period. This guarantee reassures current owners while paving the way for new investment strategies for future buyers.
The New Denormandie Scheme for Old Properties
The Denormandie scheme represents a major opportunity for renovating old properties in 2025. The tax reduction applies to the total amount of the operation, including the purchase price and renovation works, with a ceiling set at €300,000.
A concrete example: for a €250,000 investment in an old apartment to be renovated, including €50,000 in works, the tax reduction amounts to €52,500 over 12 years.
Eligible areas cover more than 500 municipalities throughout France, notably under the Action cœur de ville program. The works must represent at least 25% of the total operation cost to improve the property's energy performance.
The Loc’Avantages Program
The transformation of the Loc’Avantages program into a tax credit marks a major shift in 2025. This measure allows owners to benefit from a tax advantage of up to 65% of rental income, even if they are not taxable.
An agreement with the Anah formalizes the owner's commitment to offer moderate rents for at least 6 years. In return, rental income is secured and supplemented by a bonus of up to €2,000 for management via a social real estate agency.
Properties rated G have been banned from rental since January 2025. The primary residence must meet strict energy performance criteria. The owner can combine this program with a zero-interest eco-loan to finance renovation works.
The Malraux Law and Historical Monuments
Preserving French architectural heritage is the cornerstone of these two major tax schemes. The Malraux law allows a tax reduction of up to 30% on restoration works in remarkable heritage sites.
Owners of listed buildings enjoy even more significant advantages through the historical monuments scheme, with full deductions of renovation expenses from global income. This measure is not subject to the tax benefit cap.
A rigorous safeguard plan governs each restoration project, ensuring architectural authenticity. The enhancement of historical architecture may also include potential inheritance tax exemptions, provided the property is open to the public for a specified period.
Investing in New vs. Old Properties: What to Choose?
Tax Advantages of Investing in New Properties
Acquiring a new property comes with advantageous taxation. Notary fees are only 2–3% of the purchase price, compared to 7–8% for old properties. A significant saving that reduces your total investment cost.
The first rental of a new property allows for a two-year exemption from property tax. This measure boosts the profitability of your investment from the start.
The status of Non-Professional Furnished Landlord (LMNP) is an attractive alternative in 2025. This regime allows the amortization of both the property and furniture, significantly reducing the taxable rental income. A new furnished apartment worth €200,000 generates an annual amortization of €6,000, mechanically reducing your taxes.
Tax Reduction for Buying Old Properties
Acquiring an old property opens the door to several adapted tax reduction schemes in 2025. The Malraux law provides a reduction of up to 30% of renovation costs, capped at €400,000 over 4 years.
For revitalized areas, the Denormandie scheme is particularly attractive with a 21% tax relief over 12 years. A compelling example: an investor buying a €200,000 apartment with €60,000 in works will benefit from a total reduction of €54,600 over the commitment period.
Owners opting for Loc’Avantages enjoy a reduction of up to 65% of gross rental income. This formula is particularly beneficial in areas where social rental demand remains strong.
Comparison of New and Old Property Schemes
Eligibility conditions vary by investment type: new properties require strict energy standards and first occupancy, while old ones require substantial renovation.
Rental commitment durations range from 6 to 15 years depending on the chosen scheme. Properties located in revitalization operations benefit from more favorable ceilings.
An owner can optimize their financial situation by combining several tax mechanisms. For example, interest deduction on loans remains compatible with tax reduction schemes, regardless of property type.
Rental income is treated differently depending on the tax regime. The real regime applies automatically to unfurnished rentals exceeding €15,000 annually.
Profitable Rental Investment Strategies
Choosing Between a House and an Apartment for Rental
The tenant profile plays a decisive role in property selection. Apartments attract more students, young professionals, and childless couples, seeking proximity to urban services.
Houses appeal to families prioritizing space and tranquility. A private garden or terrace is a major asset, particularly in suburban areas where family demand remains strong.
Daily management also differs. Condominium fees for apartments simplify maintenance, whereas houses require more active upkeep by the owner: gardening, roofing, façades.
In terms of budget, apartments offer a more accessible entry point. A high-standard residence also ensures better long-term property value preservation.
The Importance of Property Location
Location is a determining factor in the success of a real estate investment. A prime geographical situation, close to public transport and essential services, ensures strong rental appeal.
Neighborhoods undergoing urban transformation present excellent potential for capital gain. For example, the arrival of a new tram line or the establishment of a university campus quickly energizes an area.
Neighborhood safety and the presence of reputable schools are major assets for attracting future occupants. A strategic location in a municipality with sustained housing demand minimizes vacancy risks.
Analyzing local development projects allows for anticipating future sector value.
Profitability Criteria to Analyze
The gross yield of a rental investment is calculated by dividing the annual rents by the total purchase price. An optimal return is around 5.9% in 2025 for major French cities.
Net yield calculation includes recurring costs: property tax, landlord insurance, and property management fees. A well-managed rental building keeps its costs below 30% of rental income.
Savvy investors also examine sector appreciation potential and local rental demand. For example, a 25m² studio in a dynamic university city generates a yield above 7% due to frequent tenant turnover.
Analyzing the price per square meter compared to neighborhood averages helps identify undervalued buying opportunities.
How to Optimize Your Tax Deduction?
Calculating the Tax Credit
The tax credit amount is calculated based on the property's purchase price and related expenses. For a new property, the tax reduction reaches 25% of the total amount invested, up to a limit of €300,000 per year.
The declaration is made using form 2042-C, precisely indicating the acquisition date, eligible renovation costs, and exact address of the property. Detailed documentation of incurred expenses is essential.
Overseas property owners benefit from a higher rate of 35%, applicable from the first year of investment. This option also applies to properties registered as commercial assets if used for professional furnished rental.
Deducting Rent and Expenses
The real tax regime allows landlords to reduce their taxable base by deducting all rental expenses from their income. This option is particularly beneficial when expenses exceed 30% of rental income.
An investor earning €12,000 annually from rent can deduct insurance fees, condominium charges, and even mortgage interest. Property tax is also deductible, unlike housing tax, which is borne by the tenant.
For new property acquisitions, the first years often generate a deficit due to the combined effect of notary fees, loan interest, and condominium charges. This situation enables significant tax optimization, especially for highly taxed individuals.
The Property Deficit Mechanism
The property deficit mechanism is an attractive strategy for landlords in 2025. It allows for a substantial tax reduction when property-related expenses exceed rental income.
A higher ceiling of €21,400 now applies to energy renovation works carried out between 2023 and 2025, provided the property's energy rating improves from E, F, or G to at least D.
The excess deficit can be carried forward to property income for the next 10 years. This option is particularly beneficial for owners undertaking major renovations. A property rated F renovated to class C, for instance, maximizes this tax advantage.
Overseas Investment Specifics
Special Schemes for Overseas
The CIOP is the new flagship scheme for overseas real estate in 2025. It replaces the Pinel Overseas law and offers a 35% tax credit on the purchase of new rental housing.
The Girardin Social Law remains available in overseas territories and New Caledonia. Investors can help fund social housing while benefiting from an immediate tax reduction of up to €60,000.
A specific tax benefit cap of €18,000 per year applies to overseas investments, compared to €10,000 for metropolitan schemes. This advantageous measure maximizes tax savings while contributing to the development of overseas territories.
Eligible Geographic Zones
Eligible overseas territories fall into three main regions. The French West Indies include Martinique and Guadeloupe, known for a dynamic real estate market and strong rental demand.
The Indian Ocean includes Réunion and Mayotte, two departments with contrasting profiles but promising investment prospects. The former has a developed economy, while the latter experiences rapid population growth.
The Pacific region encompasses New Caledonia, French Polynesia, and Wallis and Futuna. These territories have specific construction and urban planning rules. Note that Saint-Martin, Saint-Barthélemy, and Saint-Pierre-et-Miquelon also have special regimes adapted to their local markets.
Increased Tax Reduction Rates
Increased tax reduction rates adapt to several criteria in 2025. A 10-point bonus applies to properties located in Sensitive Urban Zones (ZUS), raising the tax benefit up to 42% over 12 years.
Energy performance also plays a key role. Installing equipment using renewable energy grants an additional 4-point increase.
An investor can maximize these benefits by combining various criteria. For example, for a €250,000 apartment in a ZUS with solar panels, the tax reduction can reach €64,000 over the commitment period, provided rent and tenant income ceilings are respected.
Financing Your Investment Project
Real Estate Loan Solutions
The mortgage market is experiencing a revival in 2025. Average rates stabilized at 3.19% make rental investment more accessible. Banks now offer tailored solutions for various investor profiles.
The loan duration plays a decisive role in the profitability of the project. Loans over 15 or 20 years limit the total credit cost thanks to interest calculated over a shorter period. Investment-specific loans also allow future rents to be included in income calculations.
LCL stands out in this segment with preferential terms for investors, while Société Générale favors civil servants in their rental projects.
Aid for Rental Investment
Financial support schemes are increasing in 2025 to support rental projects. The energy renovation bonus now reaches €15,000 for landlords upgrading their property to class A or B.
MaPrimeRénov' is tailored to investors with a 20% bonus for properties rented at moderate rates. Regional authorities offer additional subsidies, such as the Occitanie region which grants up to €3,000 for installing eco-friendly equipment.
The Energy Renovation Guarantee Fund secures your loans up to 75% of the renovation costs. A major advantage for convincing financial institutions and obtaining favorable rates for your rental rehabilitation projects.
Recommended Personal Contribution
A minimum contribution of 10% of the purchase price is standard for rental investment in old properties. This amount covers notary fees and reassures banks of your savings capacity.
For new properties, the bar is lower with a 5% contribution due to reduced notary fees. Banks sometimes accept 100% financing for solid files showing excellent rental profitability.
Gradually building your personal contribution through a Housing Savings Plan allows access to preferential rates. A PEL opened for 4 years guarantees a better mortgage rate and shows financial reliability.
Support in Your Project
The Role of the Tax Advisor
A real estate tax expert analyzes your overall asset situation to define the optimal strategy. Their main mission: identify the schemes suited to your profile and maximize your tax benefits.
The advisor’s personalized support covers several key aspects. They assess the profitability of various tax reduction mechanisms, determine the most advantageous legal structure, and ensure compliance with legal obligations throughout your project.
The tax advisor’s multidisciplinary skills are valuable: mastery of tax law, deep knowledge of the real estate market, and expertise in asset management. This 360° vision ensures sustainable optimization of your investments.
Key Steps in Your Investment
The success of a rental project begins with an in-depth analysis of the local real estate market. Study prices per square meter, rental demand, and the area's development prospects.
The second phase requires a precise evaluation of your investment capacity. A detailed budget should include the personal contribution, loan installments, and a reserve for unexpected costs.
The technical study of the property is a crucial step. Have a full diagnosis conducted by qualified professionals, verify compliance with energy standards, and anticipate necessary work. For example, renovating an outdated bathroom may cost between €5,000 and €8,000.
The administrative phase requires careful attention to legal documents and insurance contracts to secure your investment.
Pitfalls to Avoid
Rushing is one of the main causes of failure in tax-reducing real estate investments. Beware of promises of excessive returns: a rate above 7% should raise your suspicion.
Poor estimation of expenses can quickly turn a good opportunity into a financial pitfall. Carefully calculate property tax, condominium fees, and anticipate future renovations. For example, replacing a communal boiler may cost several thousand euros.
Signing an exclusive mandate with an agency limits your negotiation possibilities. Favor competition to obtain the best terms. Also, don’t forget to check the financial reliability of the developer before committing, especially for new programs.
Market Outlook for 2025–2026
New Real Estate Programs
Residential programs in 2025 are revolutionizing housing with reinforced environmental standards. New buildings now systematically incorporate bio-based materials and innovative energy management technologies.
Architectural trends favor modular spaces and generous outdoor areas. Next-generation residences offer shared gardens, collaborative workshops, and coworking spaces, addressing new resident expectations.
Eco-districts are multiplying in regional cities, particularly in Bordeaux, Nantes, and Lyon. These ambitious projects combine energy performance and quality of life, with positive-energy buildings and infrastructure for sustainable mobility.
Evolution of Tax Schemes
The 2025 tax reform brings major changes for investors. The energy renovation tax credit rises to 40% of eligible expenses, capped at €25,000 per property. A great opportunity for owners seeking to improve their assets.
Landlords now benefit from a special 30% allowance on rental income if they commit to comprehensive renovation. This measure applies to work completed before December 31, 2026.
The LMNP status is undergoing significant revision with the introduction of an annual amortization cap set at 5% of the property’s value. An owner investing €200,000 can deduct up to €10,000 per year from taxable income.
Promising Investment Areas
Emerging regional cities are drawing savvy investors in 2025. For instance, Mulhouse stands out with an exceptional rental yield of 11.9%, thanks to its economic dynamism and still-accessible property prices.
Toulouse is also experiencing strong growth, particularly in the Montaudran and La Cartoucherie neighborhoods. These areas show average yields of 5.3%, driven by sustained demographic growth and a booming job market.
Moreover, medium-sized cities like Limoges or Saint-Étienne offer unique opportunities with property prices around €2,000/m², far below major metropolitan areas. These local markets enjoy stable rental demand, especially from students and young professionals.
Conclusion
Would you like to benefit from our real estate and tax reduction advice? Do you have a rental investment or property resale project involving a house, apartment, or rental building? Contact your local Optimhome real estate advisor and take advantage of their local market expertise to support you in all your buying, selling, and rental projects, whether for your primary residence or your investments.
FAQ – Real Estate and Tax Reduction in 2025
How can I reduce my taxes through real estate?
By investing in rental property through schemes such as LMNP, property deficit, or the Loc'Avantages program, you can deduct expenses, amortizations, or benefit from tax credits.
How do I benefit from tax reduction when buying an old property?
You must carry out eligible renovation work, respect rent and tenant income ceilings, and invest via schemes such as Denormandie or the Malraux law.
What are the tax reduction schemes in 2025?
The main schemes are: Denormandie, Loc'Avantages, LMNP, Malraux law, historical monuments, CIOP in Overseas France, and the enhanced property deficit.
How to invest in rental real estate?
Determine your budget, choose a high rental demand area, select a profitable property, and opt for the right tax regime (real, LMNP, etc.).
What is the difference between investing in new and old property?
New properties come with lower fees and benefits such as property tax exemption; old properties provide access to more flexible and profitable renovation schemes.
Does the Pinel scheme still exist in 2025?
No, the Pinel law ended in late 2024, except for reservations made before 12/31/2024 and finalized before 03/31/2025.
What is the Loc’Avantages program?
It’s a scheme offering a tax credit of up to 65% of rent if you rent at a moderate rate under agreement with Anah, for a minimum of 6 years.
What are the conditions for benefiting from the property deficit?
You must rent an unfurnished property, carry out eligible works, and generate a deficit that can be deducted from global income (up to €21,400 for energy renovation).
Author
Fabrice DOBROWOLSKI, Network Development Director at Optimhome
"Benefit from my expert advice, based on many years of experience in real estate, to ensure the success of your buying or selling project."
