Tax reduction or tax credit: what's the difference for refunds, allocation and carry-forward?

A tax reduction and a tax credit are both deducted from the tax owed. The difference lies in what happens when the benefit exceeds the tax due. If it's a reduction, the excess is not refunded. If it's a credit, it is generally refunded in whole or in part, even for a non-taxable household, except in certain cases. According to service-public.gouv.fr, amounts less than €8 are not refunded.

This page deals with the refund, the order of allocation in relation to credits, carryover, and the overall cap. It does not address the order of allocation between several reductions, the complete list of refundable credits, or the situation of non-residents.

The difference in a table

Sources: service-public.gouv.fr (sheet F823, verified on 15/04/2026), impots.gouv.fr (page modified on 08/07/2026), BOFiP BOI-IR-RICI (version of 27/08/2026).

Tax reduction: no refund

The BOFiP (Official Bulletin of Public Finances) states the rule in one sentence: "Tax reductions cannot be refunded."«

Fact sheet F823 on service-public.gouv.fr gives an example: a €700 tax reduction for €500 of tax. The €200 surplus is "lost," meaning it is not refunded.

Classified as a tax reduction by the BOFiP: the Malraux reduction (real estate restoration), as well as the reduction for gifts.

The tax credit: refunded in whole or in part

The F823 fact sheet on service-public.gouv.fr states: "Unlike a tax reduction, a tax credit is refunded to you in whole or in part in the following cases," and then lists these cases. The BOFiP (Official Bulletin of Public Finances) specifies that, with some exceptions, tax credits are refunded when the tax due is less than or equal to zero, subject to the non-refund threshold of Article 1965 L of the French General Tax Code (CGI). This threshold is €8 according to service-public.gouv.fr ("Amounts less than €8 are not refunded"). The wording on impots.gouv.fr is not exactly the same: the case of an amount of exactly €8 is not addressed here and should be verified with the tax authorities.

An exception noted in the BOFiP (Official Bulletin of Public Finances): conventional tax credits, those designed to eliminate double taxation. According to the BOFiP, like tax reductions, they are not refundable and cannot be carried forward. If you receive income from another country, this point should be examined in your tax case. This page does not list other exceptions.

The BOFiP classifies the employment of a home-based employee among the tax credits.

In what order are the benefits allocated?

Two rules from the BOFiP apply to reductions:

• They are only deducted from income tax calculated by applying the progressive scale, and not from the tax at a proportional rate; ;
• They are carried out after the application of the discount, where applicable, and before the allocation of tax credits and non-final withholding taxes.

There is one exception. The BOFiP (§ 35) indicates that treaty tax credits, those intended to eliminate double taxation, are applied before tax reductions. As a general rule, reductions therefore take precedence over tax credits, except for treaty credits.

The order in which discounts are applied is not addressed here. This can be verified on your file.

Postponement: provided for by certain schemes only

An unused tax credit is not refunded. However, it can be carried forward if the relevant scheme allows it. The BOFiP (§ 35) indicates that a carry-forward is possible in two cases: when the payments qualifying for the tax benefit exceed the annual limit, or when the amount of the benefit exceeds the tax due for the year. In § 30, it cites gifts and subscriptions to the capital of small and medium-sized enterprises as expenses that can be carried forward when they exceed the limit.

For example, regarding the Malraux tax reduction, the French tax authority (BOFiP) (BOI-IR-RICI-200-30, § 146) stipulates that if the portion of the reduction attributable to a given year exceeds the tax due, the balance can be carried forward and applied to the income tax due for the following three years. This rule applies to building permit applications or prior declarations filed on or after January 1, 2017. Other situations (for example, subscriptions to SCPI units, which have a different reference date) are addressed in the text. The three-year period refers to the Malraux scheme; other tax incentive programs have their own specific rules.

The overall cap on tax benefits

The total of certain tax benefits for a household cannot result in a tax reduction exceeding a certain limit. The BOFiP (Official Bulletin of Public Finances) specifies that tax reductions and credits are assumed to fall within the scope of this provision (Article 200-0 A of the French General Tax Code). Excluded, in particular, are gifts, the Malraux tax reduction, expenses related to historical monuments, and tax credits granted to businesses.

The limit amount is not addressed on this page.

What will change in 2026

The tax credit for charging stations is eliminated for expenses paid from January 1, 2026 (economie.gouv.fr, page updated on April 30, 2026). This page does not reflect any other changes in 2025 or 2026 regarding the rules for reimbursement and allocation.

Some rates and ceilings cited by the administration

economie.gouv.fr cites, to illustrate the difference:

• tax credit for personal services: 50 % of expenses, with a ceiling ranging from €12,000 to €20,000; ;
• Reduction for gifts: 66 % or 75 %, within the limit of 20 % of taxable income.

The conditions of each scheme are not detailed here.

Numerical example (fictitious profile)

Situation. Hélène and Marc have, as a first benefit, a tax liability of €2,000 (hypothetical profile, after discount). They are entitled to a benefit of €3,000. When the benefit is a tax credit, the assumption is that of a refundable, non-standard tax credit, without application of the €8 threshold. The figures are arbitrary and serve to illustrate the mechanism.

Issue. This same benefit of €3,000 does not produce the same effect depending on whether it is a discount or a credit.

Strategy. Compare the two types of benefits for the same household, then consider a case where a tax reduction and a tax credit are combined. Generally, tax reductions take precedence over tax credits; the tax credit in this latter case is considered unconventional.

Result.

In the latter case, the €1,500 reduction lowers the tax from €2,000 to €500. The €1,000 credit cancels out this €500, and the remaining €500 is refunded. For this household, a benefit of €3,000, equal in both cases, leaves a difference of €1,000 : refunded if it is a credit, not refunded if it is a reduction (a deferral is only possible if the scheme provides for it).

These profiles are fictitious. The calculation ignores the overall cap, carryover, and special cases. The figures illustrate the mechanism and do not predict your situation.

What changes depending on your situation

• The nature of the advantage : reduction, credit, or conventional credit, which is not repaid and is applied before reductions.
• The amount of your tax after discount: he decides which part of the benefit is used.
• The postponement : it depends on the device in question.
• The overall cap : some advantages fall under this category, others are excluded.
• Your foreign-sourced income : they may qualify for a conventional loan.
• Your tax residence : this page does not deal with non-residents.

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