Why taxation eats into your returns
When comparing two investment properties, most people look at the gross yield or the net-of-expenses yield. But the number that truly matters is what lands in your bank account after the tax authorities have taken their share. The gap between net-of-expenses and net-of-tax can reach several percentage points of yield.
In France, rental income is subject to two separate levies: income tax (IR) and social contributions (CSG/CRDS). These two layers stack up, and the final rate depends directly on your marginal tax bracket. An investor in the 30% bracket will pay a very different amount from one in the 11% bracket.
Understanding this mechanism is essential for choosing the right tax regime and accurately estimating your real cash flow. It also explains why two people with the same property can end up with very different results.
17,2 %
Social contributions
11-45 %
Income tax (marginal rate)
28-62 %
Maximum combined rate
Income tax: the progressive scale
Rental income is added to your other income (salary, pensions, etc.) in your annual tax return. It is then taxed according to the progressive IR scale, which has five brackets ranging from 0% to 45%. The bracket in which your last euro of income falls determines your marginal tax rate (TMI).
For example, if your total taxable income (salary + rent) places you in the 30% bracket, every additional euro of rent will be taxed at 30%. But be aware that not all your income is taxed at 30% — only the portion that exceeds the threshold of the previous bracket.
In practice, a couple earning 60,000 euros with an additional 8,000 euros of net rental income will pay about 2,400 euros in income tax on those rents (30% of 8,000). But if the same couple earns 25,000 euros, the rate drops to 11%, meaning just 880 euros.
Social contributions: the unavoidable 17.2%
On top of income tax, your rental income is subject to social contributions at a combined rate of 17.2%. This breaks down into CSG (9.2%), CRDS (0.5%) and the solidarity levy (7.5%).
Unlike income tax, which depends on your personal situation, social contributions are charged at a flat rate. They apply to the same taxable base as income tax — that is, after deducting expenses and allowances. This is a non-negotiable floor: even with a 0% marginal tax rate, you will always pay 17.2% on your net rental income.
Concretely, on 10,000 euros of net rental income, social contributions amount to 1,720 euros. Add income tax according to your bracket, and you get the true tax cost of your investment.
| Income bracket | Income tax rate | Total rate (IT + SC) |
|---|---|---|
| Up to 11,294 euros | 0% | 17.2% |
| 11,295 - 28,797 euros | 11% | 28.2% |
| 28,798 - 82,341 euros | 30% | 47.2% |
| 82,342 - 177,106 euros | 41% | 58.2% |
| Over 177,106 euros | 45% | 62.2% |
The real rate by marginal bracket
The effective tax rate on your rental income is the sum of your marginal rate and the 17.2% social contributions. For a taxpayer in the 30% bracket, that gives 30 + 17.2 = 47.2%. Nearly half of your rental income goes to taxes and contributions.
This is why choosing the right tax regime matters so much. The micro-foncier or micro-BIC schemes apply a flat allowance (30% or 50%) before calculating tax. The real-expenses regime lets you deduct actual costs and, under LMNP, depreciate the property. Depending on your situation, the difference can exceed 3,000 euros per year.
Buy&Rent automatically calculates your tax liability under all four applicable regimes based on your marginal rate, so you can choose the one that minimises the bill.
Worked example: a one-bedroom flat rented at 650 euros per month
Take a flat purchased for 120,000 euros, rented at 650 euros excluding charges. Annual rent comes to 7,800 euros. Under micro-foncier (unfurnished letting), the 30% allowance reduces taxable income to 5,460 euros. Under micro-BIC (furnished), the 50% allowance brings it down to 3,900 euros.
For an investor in the 30% bracket, total tax (income tax + social contributions) will be 2,577 euros under micro-foncier versus 1,840 euros under micro-BIC. The 737-euro annual difference often justifies switching to furnished letting. And under real-expenses LMNP with depreciation, it is possible to pay zero tax for several years.
These figures show that the question is not just how much rent you collect, but how much you keep after tax. It is this net-of-tax amount that determines the true profitability of your investment.
Warning: your rental income is added to your other income. If you are close to a bracket threshold, a few thousand euros of rent can push you into the next bracket. Always simulate with your total income, never with rent alone.
Optimising your rental taxation without overcomplicating things
The first step is to know your exact marginal rate. You can read it directly on your tax notice. Then simulate each regime (micro-foncier, real-expenses foncier, micro-BIC, real-expenses LMNP) to identify the most favourable one. This is what Buy&Rent does in seconds.
Second lever: adjust the type of letting. Switching to furnished rather than unfurnished gives access to the BIC regime, which is more advantageous in most cases. Third, if you have significant expenses (renovation, loan interest), the real-expenses regime is almost always better than the flat allowance.
Finally, think about timing. Depreciation under real-expenses LMNP can eliminate tax for 10 to 15 years. After that, when depreciation runs out, you can sell or adjust your strategy. The key is to factor taxation into your calculations from the start, not after signing.
Key takeaway
Taxation of rental income ranges from 17.2% (0% marginal rate) to 62.2% (45% marginal rate). The choice of tax regime and letting type (unfurnished or furnished) can reduce the bill by several thousand euros per year. Always factor in your actual marginal rate before calculating a property's profitability.