Malraux: excluded from the tax loophole cap, deferral over 3 years

The Malraux tax reduction is not subject to the overall cap on tax benefits: the French tax authorities (BOFiP) exclude it from the 2013 tax year onwards, for expenses for which the building permit or work declaration was filed on or after January 1, 2013. It has other limitations: €400,000 in eligible expenses over four consecutive years, and the income tax owed. For applications filed on or after January 1, 2017, if the tax reduction for a given year exceeds the tax due, the balance can be carried forward and applied to the tax of the following three years. Tax reductions are not refundable.

This page deals with the relationship between the Malraux law and the overall cap, then the carry-forward of the balance. It does not detail the rates per district (a dedicated page exists), the boxes on the income tax return, the situation of non-residents, the order of allocation between several tax reductions, nor the case of leaving France during the carry-forward period.

What does "excluded from the cap" mean?«

The overall cap limits the total tax benefits in a given year. The BOFiP (Official Bulletin of Public Finances) refers to a cap "of €10,000 or €18,000 applicable since January 1, 2013." It distinguishes between benefits subject to the cap and those exempt from it.

The Malraux tax reduction (Article 199 tervicies of the French General Tax Code) falls into the latter category. The BOFiP (Official Bulletin of Public Finances) states that it "is excluded from the overall cap on tax benefits starting with the taxation of income for the year 2013," pursuant to Article 73 of the 2013 Finance Law (Law No. 2012-1509 of December 29, 2012). In practical terms, the Malraux tax reduction is not added to your other benefits when you compare them to the cap, subject to the date condition specified below.

Excluded from the cap does not mean unlimited. Malraux has its own limits, described below.

The date condition

The BOFiP specifies the expenses concerned. Note (1) in the table in BOI-IR-LIQ-20-20-10-10 refers to real estate restoration expenses for which "a building permit application or a work declaration was filed on or after January 1, 2013." BOI-IR-RICI-200-30 (§ 180) uses the same filing date.

If your building permit or work declaration dates from before January 1, 2013, the applicable rule must be checked with the source (BOFiP and article 199 tervicies of the CGI) before any decision.

Malraux and SME reduction: two different approaches

The contrast is useful, because the reduction for subscription to the capital of SMEs (article 199 terdecies-0 A of the CGI) follows the other logic.

For the same year, of the two reductions, only the SME reduction counts in the calculation of the ceiling (Malraux under the condition of date seen above).

What limits Malraux to the place

A spending cap

Eligible expenses are capped at €400,000 over a period of four consecutive years. Any amount exceeding this limit cannot be carried forward or deducted when calculating rental income (BOFiP, BOI-IR-RICI-200-30, § 95).

The rate

According to impots.gouv.fr, the rate is 22% for properties located in a protected wealth site not covered by an approved preservation and enhancement plan (PSMV). It is 30% for a protected wealth site covered by an approved PSMV, as well as for a deteriorated historic district or a district within the NPNRU (National Program for Urban Renewal). The higher the rate, the greater the tax reduction, and the more likely it is to exceed your tax liability.

Regarding location, the same page indicates that the designated area, such as a deteriorated historic district or a district with a high concentration of deteriorated older housing, is only eligible for expenses paid up to December 31, 2024. This date will have passed by October 17, 2026; for expenses paid after this date, please check with the source. The page does not provide a general end date for the program.

Your income tax

The Malraux tax reduction is a tax reduction. The BOFiP (Official Bulletin of Public Finances) specifies that it is applied "in its entirety to the income tax due." Tax reductions are applied after the discount and before the application of tax credits. The BOFiP adds: "Tax reductions cannot be refunded."«

The three-year postponement

For building permit applications or prior declarations submitted from January 1, 2017, the BOFiP (Official Bulletin of Public Finances) stipulates the following: "when the portion of the tax reduction attributable to a tax year exceeds the tax due," "the balance may be applied to the income tax due for the following three years." The impots.gouv.fr website (page modified on April 8, 2026) reiterates the same rule.

Two points of clarification:

• Order. «"The fractions thus carried over are allocated first, with the oldest ones being considered first."»
• Before 2017. For applications submitted up to December 31, 2016, the BOFiP (Official Bulletin of Public Finances) states that "no provision is made for spreading or splitting the tax reduction." The unused portion cannot be refunded or carried forward.

Tax reductions do not give rise to a refund (BOFiP, above): the portion which could not be used after the following three years is therefore not reimbursed.

Numerical example (fictitious profile)

Situation. Hélène and Paul form a tax household subject to the progressive tax scale. They pay €300,000 for complete restoration work in the same year on a building located in a protected wealth site not covered by an approved PSMV (tax rate of 22 %). The building permit was filed after January 1, 2017, and the eligibility conditions are assumed to be met (including, depending on the location, a complete restoration declared to be in the public interest). They also subscribed to the capital of a small or medium-sized enterprise (SME), which entitles them to an €8,000 tax reduction. This subscription involves unlisted securities and exposes them to a risk of capital loss. Assumption: the tax against which the Malraux tax reduction can be applied is €20,000 per year in scenario A, and €15,000 per year in scenario B.

Issue. Does the Malraux tax reduction use up their €10,000 limit? Can they use it in full?

Strategy. For the capping, only count the benefits that fall within its scope. For Malraux, deduct the reduction from the tax of the current year and then from the tax of the following three years.

Result.

Overall cap:

Allocation of the €66,000 Malraux tax reduction:

In scenario A, the full tax reduction is applied. In scenario B, €6,000 is not refunded. In this example, the limit comes from the available tax, not the overall cap.

If the couple had received €12,000 in SME tax relief, without any other applicable benefits, €2,000 would have exceeded the €10,000 limit. For this excess, the BOFiP (French Official Tax Bulletin) provides for a carry-forward "up to and including the fifth tax credit.".

These profiles are fictitious. The example assumes that the building permit was filed after January 1, 2017, and that the Malraux tax reduction is applied to the year in which the expenses are paid, and then to the following three years. It ignores the order in which various reductions, tax credits, and the discount are applied. It illustrates a mechanism and does not predict your specific situation.

What changes depending on your situation

• The date of the planning permissions. It conditions the three-year postponement (applications from January 1, 2017) and the exclusion from the cap (permits or declarations of works from January 1, 2013).
• Your income tax for the four years in question. It determines the portion of the reduction that you allocate.
• Your other tax advantages. Those within the scope of the cap share the same cap. Malraux is not among them.
• The amount and schedule of expenses. The €400,000 ceiling applies over four consecutive years.
• Your resident or non-resident status, that this page does not address.

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