Property deficit: deduction limit, carry-forward over ten years and rental obligation

The property deficit can be deducted from your total income up to a limit of €10,700 per year. Only the portion of the deficit not resulting from loan interest can be deducted from your total income. Any amount exceeding this limit is not immediately lost: it is carried forward and offset against your property income over the following ten years.

In return, the accommodation must remain rented until December 31 of the third year following the allocation.

This page deals with French tax households and unfurnished rental properties. It does not cover special tax regimes (historical monuments, Malraux scheme, agricultural or forestry deficits) or the situation of a non-resident.

The rules in a table

Sources: BOFiP BOI-RFPI-BASE-30-20, instructions for the special 2044 declaration (March 2026).

First condition: to be on the actual tax regime

The micro-property regime applies a flat-rate allowance of 30% and does not allow for the recording of a loss (BOFiP BOI-RFPI-BASE-30-20, § 10). You are subject to the actual expense regime in three cases:

• your gross rental income exceeds €15,000; ;
• you are excluded from the micro-land tax regime; ;
• You have opted for the actual option. The option is valid and irrevocable for three years.

What expenses create a deficit?

Repair, maintenance, and improvement expenses are deductible from rental income. According to economie.gouv.fr, construction, reconstruction, or expansion expenses are not deductible from rental income.

The BOFiP (French Official Tax Bulletin) defines improvement expenses as those that add new or improved equipment or amenities to a building, without altering its structure. The distinction between improvement and expansion should be verified before signing a quote.

How the deficit is allocated, step by step

1. On your rental income. The deficit is first offset against the rental income you receive.
2. On total income, up to a limit of €10,700 per year. Only the portion of the deficit that comes from expenditures other than loan interest can go there.
3. On property income for the following ten years for everything else, including the portion related to loan interest.

The instructions for the 2044 declaration illustrate the ten-year rule: on December 31, 2025, the land deficit for the year 2015 is definitively lost.

The increased ceiling of €21,400: energy renovation

Optionally, the limit of €10,700 can be raised to the amount of energy renovation work expenses, without exceeding €21,400 per year.

The conditions noted in the BOFiP and in the instructions for the declaration:

• the works must enable the property to move from an energy class E, F or G to a class A, B, C or D; ;
• the quote must have been accepted from November 5, 2022; ;
• these expenses are only reported on line 224 bis of the 2044 (or 2044 special) declaration; ;
• The instructions require an energy performance diagnosis (DPE) to be carried out before and after the work. If the taxpayer cannot provide proof of a new DPE for the property, the BOFiP (§ 290) stipulates that their income will be recalculated according to standard tax rules.

This increased ceiling is subject to a time limit. The official documents we consulted do not agree on the period during which the work must be paid for. Therefore, this page does not provide an end date: this should be verified in the current regulations before signing a quote.

For certain types of housing (Cosse scheme, and Périssol scheme under certain conditions), the administration indicates a ceiling of €15,300. These schemes have their own specific conditions, which are not addressed here.

The obligation to rent: three years after the allocation

The property must be rented out until December 31st of the third year following the deduction of the deficit from total income. If this condition is not met and no exception applies, the deduction is disallowed (BOFiP § 370, notice 2044).

The BOFiP provides for exceptions, each with its own conditions (§ 390 to 440):

• the disability (2nd or 3rd category) of the taxpayer or his or her spouse or civil partner subject to joint taxation; ;
• the dismissal of the taxpayer or their spouse or civil partner. According to the BOFiP, it only applies if the year of dismissal is later than the year of the deduction; ;
• death. According to the BOFiP, it only applies to deficits prior to the date of death; ;
• expropriation for reasons of public utility of the building, if the property was rented before the expropriation; ;
• the merger of the SCPI that owns the building.

Where to declare it

• Actual rental income is declared on form 2044 (for standard properties) or form 2044 special (for specific cases detailed in the instructions). Only one of the two forms is filed per household, and it is attached to form 2042.
• On form 2042: box 4BB receives the deficit deductible from property income, box 4BC the deficit deductible from total income, box 4BD the previous deficits not yet deducted.

Social charges

Property income is subject to CSG at a rate of 9.2 %, i.e. 17.2 % of social levies in total (service-public.gouv.fr, verified on June 30, 2026).

Numerical example (fictitious profile)

Situation. A Lyon-based business owner owns an unfurnished apartment. With €9,000 in annual rent, he opts for the actual expense method of taxation, a choice that is valid and irrevocable for three years. He finances improvement and maintenance work without taking out a loan and deducts €31,000 in expenses. His marginal tax rate is 41% (based on a hypothetical profile).

Issue. The deficit exceeds the annual limit. What is the purpose of the excess portion, and what must it then comply with?

Strategy. The firm reviews with him the nature of the work, the line of the declaration where it relates, and the duration of the lease to be maintained.

Result.

For a deficit charged against the income of year N, the accommodation must remain rented until December 31 of year N + 3.

This profile is fictitious. The 41 % rate is an assumption, as is the absence of loan interest: its presence changes the calculation and is addressed on the case file. The credit is a deduction from taxable income; it does not reduce the tax itself. The figures illustrate the mechanism and do not indicate any outcome for your specific situation.

What changes depending on your situation

• The tax regime: actual or micro-property regime. Without the actual regime, there is no deficit.
• The nature of the expenses: repair, maintenance and improvement, or construction and expansion.
• The proportion of loan interest in your expenses.
• The level of your other income determines the value of a deduction of €10,700.
• The type of work, particularly energy renovation, and its supporting documents.
• Your ability to keep the property rented until the end of the commitment period.

This page does not show the amount of your deficit or the estimated resulting tax savings. No results are guaranteed.