Are you an owner and want to rent out your property? You can opt for Loc’Advantages scheme or furnished rentals. The Loc’Avantages system allows you to benefit from a significant tax reduction calculated according to the amount of the rent. The lower the rent, the greater the tax reduction. Loc’Avantages is a tax incentive status offered by ANAH.
At first glance, you can quickly think that the Loc’Avantages system represents a real asset for reducing the taxation of your rental income. However, the State gives you access to this tax advantage but not without consideration. This tax exemption system must be accompanied by a reduction in your rents and taxation on taxable rents. This compromise does not exist in furnished rentals, which also represents a real tax advantage if you choose the right tax regime. How can furnished rentals prove to be a more suitable solution for saving tax? We will explain to you!
How to benefit from Loc’Advantages?
As an owner, you must sign an agreement with Anah where you agree to:
- Rent an unfurnished property for a minimum period of 6 years;
- Do not exceed a maximum amount of rent (loc1, loc2 or loc3);
- Rent, as a main residence, to a tenant with income below the resource limits set by the State;
- Your tenant must not be a member of your family;
- Do not rent a thermal sieve, i.e. any accommodation classified as label F and G.
You have the choice between three rent levels, which are calculated by applying a discount to the market rent observed in the municipality of the accommodation (ceiling rents per municipality: find the one that applies to your home simulator ANAH).
The discount rates are as follows:
- – 15% for Loc1
- – 30% for Loc2
- – 45% for Loc3 Deductible
charges and depreciation for furnished rentals can be deducted.
You can deduct your charges (borrowing interest, taxes, management fees, etc.) and amortization from your tax result if you choose to invest in furnished rentals. You can reduce your taxable income but on condition that you choose the right tax regime: the real regime.
With the micro-BIC scheme, it is impossible to deduct your expenses and depreciation. On the other hand, you benefit from a fixed abatement of 50% (or 71% for classified tourist accommodation).
If the lump-sum reduction of the micro-BIC scheme seems to be the most advantageous, well, think again. In 85% of cases, the real regime is fiscally more favorable. It reduces your taxation or even completely neutralizes it for several years.
Better profitability in furnished rentals
Compared to furnished rentals, the Loc’Avantages system can ultimately act as a double penalty. In addition to having the only possibility of renting bare to be able to take advantage of the device (rents which are in principle lower than the rents of furnished rentals), you must also respect a maximum rent defined by the State.
Analyze the rental demand according to the location of the property
As you can imagine, depending on the place in which you intend to acquire your property, it is the rental demand that dictates the rental market (furnished or empty, short or long term). For example, a property close to a campus can certainly find a buyer more easily if it is rented furnished. Another example, planning to rent your property as a seasonal rental is only profitable if it is located in a tourist area.
On the other hand, bare rental is suitable for a wider target group and most of the time makes it possible to limit rental vacancies, but this often to the detriment of higher rental profitability.
As you will have understood, the location of the property is a criterion not to be neglected. If after calculations, you conclude that your rental profitability is more interesting in furnished rental or unfurnished rental, you still have to succeed in renting it. During a real estate investment, market analysis is therefore a process that must be automatic and concomitant with profitability calculations.