Loan interest: deductible from rental income

Under the actual expense method, you deduct from your net rental income the interest on the loan financing the rented property, as well as loan-related expenses: application fees, mortgage registration fees, and the non-refundable portion of a guarantee. The principal repaid is not deductible. The allocation of interest to the tax year is explained below.

In the calculation, your rental income is considered to offset interest payments first. If interest payments exceed rental income, the resulting deficit can only be offset against your rental income over the following ten years.

This page deals with individuals renting unfurnished accommodation directly. It does not cover furnished rentals, companies, or non-residents. This page does not provide information on the rules applicable to mortgage insurance premiums; these are covered on their own page, mentioned below.

What can be deduced, what cannot be deduced

For which loan?

Interest is deductible only if it relates to a loan linked to a rented property. The BOFiP (French Official Tax Bulletin) covers the maintenance, acquisition, construction, expansion, repair, and improvement of the property. Interest on a sum borrowed for another purpose is not deductible in principle, nor is interest on a loan taken out to purchase property for resale.

For an acquisition, only properties intended to generate rental income are eligible. For renovations, the deduction applies regardless of the intended use of the premises. For a building under construction, you must demonstrate your intention to rent it out, an intention that the BOFiP (§ 280) links to rental use observed upon completion.

You must also justify the use of the funds. If you cannot prove that you used the entire borrowed amount for the property, you cannot deduct all of the interest.

Year of deduction, with no limit on the amount

The BOFiP (§ 240) considers the interest actually paid by the lessor during the tax year. The 2026 guide specifies that interest and loan costs are deductible "without limitation as to the amount or duration." For interest paid after the year to which it relates, the BOFiP (§ 240) uses the year of payment, while the 2026 practical guide (p. 351) links it to the year of maturity: these sources should be verified before making a decision.

Three specific cases are described by the BOFiP:

• Bullet loan : if only interest is paid during the term of the contract and the capital in one lump sum at the end, the interest remains deductible, subject to the condition of a debit balance of the account described in paragraph 290 of the BOFiP; ;
• Early repayment : expenses related to early termination are generally not deductible. They become deductible if the termination and the new loan have reduced the overall interest burden; ;
• Substitute loan Interest on a loan that repays a previous loan is generally not deductible. However, it remains deductible if the new contract explicitly mentions the initial loan and if the deductible interest does not exceed the amount of the original repayment schedule. You must indicate this on your tax return.

And what about borrower's insurance?

The BOFiP (French Official Tax Bulletin) classifies insurance premiums as loan expenses and refers to a separate policy on insurance premiums. The exact rule that applies to your contract depends on your specific situation: check before making a decision. A page on this website addresses rental loan insurance: the correct tax line to use, the required supporting documents, and the resulting tax loss.

The order of allocation: rents pay interest first

The BOFiP (Official Bulletin of Public Finances) on land deficit sets out two rules:

• gross income is "deemed to primarily compensate for loan interest", and ancillary loan costs are treated as interest; ;
• «"The portion resulting from loan interest can only be deducted from property income in the following ten years.".

The remaining deficit after rental income has covered interest payments falls under other expenses. This portion can be offset against total income up to a limit of €10,700 per year in general, provided the property is rented until December 31st of the third year following the offset. Higher limits exist in certain cases, which are not covered here. This mechanism is detailed on the page about property deficits.

Under the micro-property scheme, no separate deduction is possible: the 30 % allowance is deemed to include all expenses.

Where to declare interests

On the special 2044 tax return, interest is entered on line 250. If you deduct it, you also complete section 610 on page 6. You enter the sum of the amounts in each column of line 250 in box H on page 3. The form to use depending on your situation is explained on the page about declaring rent.

A loan with €4,300 in interest: a numerical example (fictitious profile)

Situation. A landlord in Lyon rents out an unfurnished apartment purchased with a mortgage, under the actual expense method. During the year, he paid €4,300 in interest, €450 in processing fees, a €1,000 security deposit (of which €400 is refundable), and €6,900 in principal. His other deductible expenses amount to €2,100. These figures are hypothetical.

Issue. What does he deduct, and what happens to the deficit depending on whether the rents cover the financial charges or not?

Strategy. Deduct the interest (€4,300), processing fees (€450), and the non-refundable portion of the security deposit (€600), totaling €5,350 in financial charges. Exclude the principal (€6,900) and the refundable portion (€400). First, offset the rental income against financial charges, then against other expenses.

Result.

With €6,000 in rent, the rental income covers all the interest: the €1,450 deficit comes from other expenses and can be offset against total income under the conditions mentioned above, as it is below the general limit of €10,700. With €4,800, the €550 deficit comes from financial expenses and can only be offset against rental income in the following ten years. If the owner had mistakenly deducted the principal, their result would be -€8,350 instead of -€1,450 in the first scenario.

This profile is fictitious. No tax rates are used, and the calculation does not show any results for your situation.

Interest and borrowing costs: what changes depending on your situation

• The use of lending : a loan which partly finances something other than the rented property does not entitle the borrower to deduct all of the interest.
• The type of loan : a bullet loan has its own condition, and a guarantee is only deductible for its non-refundable portion.
• Loan history : an early repayment or a substitute loan follows specific rules.
• Your rent levels : it determines whether a deficit appears and whether a portion can be carried forward for ten years.
• Your mortgage insurance : see the dedicated page.
• Your montage : company, furnished or residence abroad are subject to other rules.

The rule depends on your situation. No results are guaranteed.