Three Regimes at a Glance
When a Déficit Foncier Arises
A déficit foncier arises under the real income regime (CGI Art. 28) when the total deductible charges actually paid in the year exceed the gross receipts actually received. The deficit is the difference: it represents a net loss on the letting activity for the year.
The micro-foncier regime cannot produce a deficit: the 30% flat deduction is applied to gross receipts and can at most reduce taxable income to zero. Deficits created in prior years before switching to the micro-foncier remain available for carry-forward under the ordinary rules, but no new deficit can arise under the micro-foncier.
The Critical Interest/Non-Interest Split
The allocation of the deficit between loan interest and other charges is fundamental to understanding how the déficit foncier works:
- Gross receipts are first applied against loan interest. Any interest that cannot be absorbed by gross receipts forms an interest-related deficit;
- The remainder of the deficit — attributable to charges other than interest (works, management costs, taxes, insurance, copropriété provisions, etc.) — forms the non-interest deficit.
This split matters because only the non-interest deficit may be imputed against global income (within the €10,700 ceiling). The interest-related deficit can only be carried forward against future revenus fonciers.
The General Regime (CGI Art. 156, I-3°)
- Calculate total deficit = total deductible charges − gross receipts.
- Allocate gross receipts against interest first. Interest not absorbed by receipts = interest deficit (carry-forward only). Balance of deficit = non-interest deficit.
- Non-interest deficit imputed on global income up to €10,700 (or €21,400 in qualifying cases). Remaining non-interest deficit above ceiling: added to carry-forward.
- If global income < €10,700: non-interest deficit not fully absorbed → balance carried forward against global income for up to 6 years.
- All carry-forward amounts (interest deficit + excess non-interest deficit + global income shortfall excess) imputed on revenus fonciers of the following 10 years.
Gross receipts: €2,000 — Other charges: €30,000 — Loan interest: €4,000 — Total deficit: €32,000
Interest deficit = €2,000 (€4,000 interest − €2,000 receipts)
Non-interest deficit = €30,000
Scenario A — global income ≥ €10,700: non-interest deficit (€30,000) imputed on global income up to €10,700. Balance carried forward on revenus fonciers: €19,300 (excess non-interest) + €2,000 (interest deficit) = €21,300 carry-forward on revenus fonciers for up to 10 years.
Scenario B — global income = €8,000: only €8,000 absorbed against global income this year. Remaining €2,000 of non-interest deficit carried forward against global income for up to 6 years. The €19,300 + €2,000 interest deficit = €21,300 continues as a 10-year carry-forward on revenus fonciers.
Enhanced €21,400 Ceiling: Energy Renovation Works (Loi 2022-1499)
Following Loi 2022-1499 of 1 December 2022 (Art. 12), the annual ceiling for imputation on global income is doubled to €21,400 where the deficit arises from qualifying energy renovation works on residential rental properties classified as DPE F or G (passoires thermiques). The conditions for the enhanced ceiling are:
- The deficit must result in whole or in part from deductible energy renovation works on the property;
- The property must have an energy performance rating of F or G before the works (as established by a DPE);
- The works must be paid between 1 January 2023 and 31 December 2025;
- The landlord must commit to keeping the property let until 31 December 2025.
The enhanced ceiling applies to the portion of the deficit attributable to the qualifying energy works. The three-year letting condition (see below) continues to apply on top of the specific letting commitment required for the enhanced ceiling.
The enhanced €21,400 ceiling was introduced as a fiscal incentive for landlords to invest in energy renovation of the worst-performing properties (DPE F and G) before those properties become unlettable under the progressive energy performance requirements of the Loi Climat et Résilience (2021). By doubling the immediate tax relief available, the measure aims to make the economics of renovation more attractive and accelerate the transition of the private rental stock away from thermal inefficiency.
The Three-Year Letting Condition
Imputation of the non-interest deficit on global income is only definitively acquired where the taxpayer maintains the property in letting use until 31 December of the third year following the year in which the imputation was made. For example, a deficit imputed in 2022 requires continued letting until at least 31 December 2025.
Where this condition is not met, the revenue authorities reconstitute the global income and revenus fonciers of the three preceding years as if no imputation had been made. Deficits that were imputed on global income but are now reversed can then be imputed on all the revenus fonciers of the year in which they were created, increasing the carry-forward balance for that year (CE 26-4-2017 n° 400441). Remaining carry-forward amounts can still be offset against revenus fonciers from other properties for ten years; if no such properties exist, those deficits are lost (BOI-RFPI-BASE-30-20 n° 260).
Exceptions: No Recapture in These Cases
- Death of the taxpayer or their spouse;
- Invalidity of the taxpayer or their spouse;
- Job loss of the taxpayer or their spouse;
- Expropriation for public utility purposes of the property generating the deficit.
Property Owned Through a Company
Where the property belongs to a company (SCI or other), the imputation of the company’s déficits fonciers on the member’s global income is subject to a double condition: the company must keep the property in letting use for three years and the member must retain their shares in the company for the same three-year period. The €10,700 annual ceiling is assessed at the level of each individual member, not at the company level.
The three-year letting condition is often overlooked when a landlord decides to sell or change the use of a property. A sale, a switch to owner-occupation, or a conversion to a furnished letting (LMNP) within the three-year window all potentially breach the condition and trigger full reconstitution. For SCI-held properties, the additional share-holding condition means that even a partial share transfer within three years can threaten the imputation. Monitor the three-year window before making any disposal or use-change decision.
Monuments Historiques: Unlimited Global Income Deduction (CGI Art. 156 bis)
A fundamentally more generous regime applies to classified or listed historic monuments. Deficits arising from charges relating to income-producing monuments historiques are imputable on global income without any ceiling. Only charges necessary for the conservation and maintenance of the classified or listed elements of the building may benefit from this unlimited deduction. Other charges (which are not specific to the monument’s historic status) follow the ordinary revenus fonciers rules.
The benefit of the unlimited deduction regime is conditional on the owner’s commitment to retain the property for at least 15 years (CGI Art. 156 bis). The monuments historiques regime is therefore primarily suited to long-term ownership strategies, typically combining the unlimited deficit deduction with the broader fiscal advantages available to owners of classified and listed properties.
Under the general déficit foncier regime, heavy renovation works on a rental property — say, €200,000 in a year with minimal receipts — would generate a deficit where only €10,700 can be set against global income immediately; the remaining €189,300-plus is locked in a 10-year carry-forward against future revenus fonciers. For a monuments historiques owner with the same expenditure profile, the entire deficit is imputable against global income with no cap — a potentially transformative tax advantage. This is one of the main reasons why classified property ownership attracts high-income taxpayers seeking to shelter earned income through property renovation.
Carry-Forward Rules in Detail
Three categories of carry-forward amounts exist, each with different rules:
- Interest-related deficit: carried forward and imputed against revenus fonciers of the 10 following years. Cannot be imputed against global income at any point;
- Excess non-interest deficit (portion above the €10,700 / €21,400 ceiling): carried forward and imputed against revenus fonciers of the 10 following years;
- Non-interest deficit absorbed within the €10,700 ceiling but where global income is insufficient: the unconsumed portion is carried forward against global income of the 6 following years under the general global income carry-forward rules.
The 10-year carry-forward on revenus fonciers is assessed on the combined pool of revenus fonciers from all the taxpayer’s letting properties in the carry-forward year. It is not property-specific: a deficit from Property A can be offset against revenues from Properties B and C in future years.
A taxpayer who moves from the real income regime to the micro-foncier (because their gross revenus fonciers drop below €15,000) does not lose previously accumulated carry-forward deficits. Those deficits remain available for imputation against revenus fonciers once the taxpayer returns to the real income regime or if sufficient revenus fonciers arise in future years. However, no new deficit can arise under the micro-foncier.
Our French law practice advises on déficit foncier planning, renovation works timing, the enhanced energy renovation ceiling, the three-year letting condition, and the monuments historiques unlimited deduction for French and non-resident landlords.
Book a ConsultationLegal Notice. This article is provided for general information and educational purposes only. It does not constitute legal or tax advice. The enhanced €21,400 ceiling was introduced by Loi 2022-1499 of 1 December 2022, Art. 12. The energy performance classification conditions (DPE F/G) and the applicable period for qualifying works (1/1/2023–31/12/2025) should be verified with current French legislation, as these may be extended or amended. The monuments historiques regime under CGI Art. 156 bis is subject to separate eligibility conditions covering both the property classification and the letting structure. Always consult a qualified French tax adviser before making any renovation or disposal decision involving a déficit foncier.
Key Legal References
Déficit foncier: general regime — non-interest deficit imputed on global income up to €10,700/year; interest deficit and excess non-interest deficit: 10-year carry-forward on revenus fonciers; if global income below €10,700: unconsumed balance carried forward on global income for 6 years; three-year letting condition applies; double condition for company-owned property
Enhanced €21,400 ceiling for déficit foncier: introduced by Loi 2022-1499 Art. 12 modifying CGI Art. 156, I-3°; ceiling doubled to €21,400 for deficits from qualifying energy renovation works on DPE F or G properties; works paid 1/1/2023–31/12/2025; landlord commits to let until 31/12/2025
Monuments historiques: unlimited global income deduction for conservation and maintenance charges on income-producing classified or listed buildings; only charges specific to the conservation of the historic elements qualify; 15-year ownership commitment required
Real income regime for revenus fonciers: taxable income equals gross receipts minus deductible charges actually paid in the year; basis for déficit foncier calculation
Three-year letting condition breach: reversed deficits imputable on revenus fonciers of the year of creation; carry-forward continues for 10 years against other letting properties; if no other letting properties exist when deficits are reversed: deficits lost
Carry-forward after cessation of letting: remaining carry-forward deficits are lost if the taxpayer has no other rental properties against which they can be offset after the deficit property ceases to be let
