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Unfurnished versus furnished rental : comparison from tax perspective

As the choice of the type of rental is one of the key elements for the success of your investment, we offer you in the below table a comparative summary of these two packages.

Thus, we have juxtaposed them from a fiscal perspective. This analysis will enable you to identify the opportunity and to select the most interesting option.

Whether you select empty or furnished rental, you can deduct the costs and charges you face to rent your property. This is where the strategic choice of the type of project is very important because the rules for deducting the charges are different.

Unfurnished rentalFurnished rental
Profitability & tax measuresLess than 20% on average compared to furnished location.– Gross and net profitability: higher compared to unfurnished rental because the received rent is higher;
– Very advantageous: taxes are deductible and this maximizes profitability.
Régime réelYou can amortize the property;
You can only deduct: improvement, maintenance and repair work
– The lessor can add the depreciation of the value of the home which makes it possible to limit or even eliminate the taxation of rent;
Are deductible: all types of works carried out on your property, namely construction, reconstruction and expansion work, which will increase net profitability.
Deductible charges with « régime réel »
Unfurnished rentalFurnished rental
Notary feesNot deductible          Deductible
Honoraries of agencyOnly the rental feesDeductible
Price of the propertyNot deductible          Deductible
Price of the furnitureOnly improvement worksDeductible
Expansion workNot deductible          Deductible
Reconstruction workNot deductible          Deductible
Construction workNot deductible          Deductible
Maintenance workDeductibleDeductible
Repair workDeductibleDeductible
Interest on loansLimited to the total amount of annual charges and deficit carryforwardDeductible
Property taxDeductibleDeductible
Property insuranceDeductibleDeductible
Agency feesDeductibleDeductible

To sum-up, even if furnished rental appears to be more advantageous than unfurnished rental, it is nevertheless advisable to carefully study its drawbacks and limits before opting for this formula.

The keys to a significant rental income are those of handling the management of the succession of rental contracts, a good geographical location and a dynamic rental market.

Also, if you do not delegate its management to a rental agency (which will take its commission on your rental income) you will have to devote time and energy to ensure this rental turnover.

Not to mention that you will have to be available for your tenants to change furniture and equipment.

It is therefore advisable to make this choice with knowledge by not basing your choice on simple calculations but by complicated financial and fiscal maths which might require the help of an accountant.

Unfurnished rental is more stable and requires less personal investment because the lease term is longer than furnished rental. The fact remains that if you want to get it back, you will have to be patient (6 months notice) and submit to legal constraints.

Do not hesitate to get help from professional accountants to identify the most profitable and sustainable option.

French Tax Online is a tax consultancy firm specialized in foreigners investing and living in France.

A member of the Budiz Company Group, which is a French chartered accountant registered with the Order of French Chartered Accountants (OEC).

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