Real Estate in France: Key changes applicable in 2026

The year 2026 marks a significant turning point for real estate investors. The Social Security Financing Act for 2026 (LFSS 2026) and the Finance Act for 2026 introduce several major changes, particularly regarding social contributions, the status of Professional Furnished Letting (LMP), and a new incentive scheme for residential rental investment.

Increase in CSG-CRDS on certain real estate income

As from 1 January 2026, the Social Security Financing Act increases the CSG rate applicable to certain capital income from 9.2% to 10.6%, raising the overall rate of social contributions from 17.2% to 18.6%.

• Real estate income concerned

Income derived from non-professional furnished lettings (LMNP) is notably concerned. As such income is treated as capital income for social contribution purposes, it is now subject to social contributions at 18.6% instead of 17.2%.

However, LMNP investors affiliated to a social security scheme of another State of the European Economic Area (EEA), Switzerland or the United Kingdom continue to benefit solely from the solidarity levy at the unchanged rate of 7.5%.

In addition, real estate investors liable to tax on professional capital gains under the BIC regime, for example in the context of Professional Furnished Letting (LMP) or para-hotel activities, will see the overall taxation rate on long-term capital gains increase from 30% to 31.4%.

• Real estate capital gains realised by certain non-residents

It has been stated that the CSG increase “does not apply to real estate capital gains”. This statement is correct, but only for French tax residents.

If you are a French tax resident, standard real estate capital gains realised by individuals, calculated under the ordinary regime, remain subject to CSG at the rate of 9.2%. The total rate of social contributions therefore remains 17.2%. This is the point that has primarily been highlighted in general communications.

By contrast, if you are a non-resident for tax purposes, real estate capital gains realised in France are generally subject to the specific withholding tax provided for under Article 244 bis A of the French General Tax Code and, regarding social contributions, to a distinct regime provided for under Article L.136-7, I bis of the French Social Security Code. While LFSS 2026 maintained the 9.2% rate for residents’ capital gains, it did not extend this maintenance to capital gains taxed under Article 244 bis A. Consequently, the 10.6% CSG rate applies to non-residents, bringing total social contributions to 18.6%, compared with 17.2% previously.

Important exception: sellers affiliated to a social security scheme of another EEA State, Switzerland or the United Kingdom continue to benefit from the solidarity levy at the unchanged rate of 7.5%.

• Excluded income

LFSS 2026 has, however, sought to protect traditional landlords. The CSG increase therefore does not apply to rental income derived from unfurnished lettings, which remains subject to the overall social contribution rate of 17.2%.

LMP status and non-residents: a structural reform

The Finance Act for 2026 substantially modifies the conditions for qualifying as a Professional Furnished Letting (LMP) taxpayer for non-residents.

From now on, in order to determine whether you qualify as LMP, the tax authorities compare your furnished letting income not only with your other French-source income, but with all your worldwide income subject to an equivalent tax in your State of residence.

In most situations, salaries, pensions or business profits received abroad will exceed rental income derived from properties located in France. This new rule will therefore frequently result in the loss of LMP status in favour of the more common Non-Professional Furnished Letting (LMNP) status.

Please note: this reform does not apply to investments falling under the para-hotel regime, which are subject to specific tax rules.

Private Landlord Status – “Relance Logement” Scheme (also known as the Jeanbrun scheme)

In order to revive the rental market and contribute to the objective of constructing 400,000 housing units per year, with a target of reaching 2 million units by 2030, the Finance Act for 2026 introduces a new incentive scheme for private landlords known as the “Relance Logement” or “Jeanbrun” scheme.

• Purpose and mechanism

The mechanism is based on a depreciation deduction offset against rental income (revenus fonciers), in addition to the deduction of usual expenses (works, loan interest, property tax).

• Benefits for investors

For new properties (acquired off plan “VEFA” or through construction), depreciation is set at 3.5% per year for intermediate rental. It is increased to 4.5% for social housing and 5.5% for very social housing, within an overall annual ceiling of €8,000 per tax household. This ceiling is increased respectively to €10,000 or €12,000 where at least 50% of the gross income from the relevant properties falls under the social or very social category.

For older properties undergoing substantial renovation (improvement works representing at least 30% of the acquisition price) or works treated as equivalent to new construction, depreciation is set at 3% (intermediate), increased to 3.5% (social) and 4% (very social).

Depreciation is calculated on the acquisition value excluding land, the latter being excluded on a flat-rate basis of 20%.

• Main conditions for application

The property must be located in France, within a collective residential building, and let unfurnished as the tenant’s principal residence for a minimum period of nine years. The landlord must comply with rent and tenant income ceilings. The property must be let within twelve months of completion (new property) or completion of works (existing property).

Letting to a member of the same tax household or to a relative or in-law up to the second degree is excluded. The option for the scheme is exercised upon filing the income tax return for the year of completion or acquisition and is irrevocable.

The scheme applies to acquisitions and for construction projects, to building permits filed, between the day following the publication of the Finance Act for 2026 and 31 December 2028.

Roche & Cie assists real estate investors, both residents and non-residents, in the analysis, structuring and ongoing tax compliance of their investments. We remain at your disposal to review your situation and adapt your strategy to the new rules applicable in 2026.