Why the real regime is often more advantageous
Under LMNP micro-BIC, you benefit from a flat-rate deduction of 50% on your rental income. It is simple, but if your actual expenses exceed 50% of your income (which is common when you have a loan), you are paying too much tax. The real regime allows you to deduct expenses at their exact amount.
Switching to the real regime requires bookkeeping (an accountant or specialist software), but the tax saving far outweighs this cost in the majority of cases.
The real regime generally becomes more advantageous than micro-BIC as soon as your actual charges exceed 50% of your rents. At the start of an investment, depreciation alone is often enough to cross this threshold.
Common deductible expenses
Loan interest and borrower insurance are fully deductible. So is property tax (excluding the waste collection tax, which is recoverable from the tenant). Property management fees, whether you use an agency or manage yourself, are deductible.
Landlord insurance (PNO), non-recoverable co-ownership charges, maintenance and minor repair costs, accounting fees, CFE (business property contribution): all of these are deductible.
Notary fees on acquisition are not recurring expenses but can be spread or deducted in the first year depending on the accounting choice.
Deductible charges under LMNP real regime
Depreciation: the notional expense that changes everything
In addition to actual expenses, the LMNP real regime allows you to depreciate the property (excluding land) over 25 to 30 years and the furniture over 5 to 10 years. Depreciation is an accounting expense that reduces taxable income without any cash outflow.
Example: a property bought for 200,000 euros (of which 40,000 euros is land) is depreciated on the basis of 160,000 euros, i.e. approximately 5,300 euros per year over 30 years. Furniture worth 5,000 euros is depreciated over 5 years, i.e. 1,000 euros per year. That is 6,300 euros per year in additional deductible expenses, without spending a single cent.
Renovation and improvement works
Improvement and renovation works are either deducted as expenses (if they do not significantly increase the property's value) or depreciated over their estimated useful life. A fitted kitchen costing 5,000 euros will be depreciated over 10 years. A facade renovation will be depreciated over 15-20 years.
Construction or extension works must be depreciated (never deducted as expenses). The distinction between maintenance, improvement and construction is important and should be validated with your accountant.
Simulate the tax impact of your expenses
Buy&Rent automatically integrates all these expenses into the tax calculation of your simulation. You enter your expected expenses (property tax, insurance, management fees, renovation work) and the simulator calculates the depreciation, taxable income and tax for each of the 4 regimes.
This allows you to check whether the real regime is more advantageous than micro-BIC in your situation, and estimate the tax saving before even buying the property.