Two ways to rent, two different tax treatments
In France, when you let a property, you can choose between unfurnished (bare) rental and furnished rental. This choice is not just about furniture: it determines the applicable tax regime, the type of lease, and ultimately the amount of tax you pay on your rental income.
Unfurnished rental falls under property income (micro-foncier or real regime). Furnished rental falls under BIC (industrial and commercial profits) with LMNP status. This distinction has major consequences on your net return.
Unfurnished rental: simplicity and stability
With unfurnished rental, the lease runs for a minimum of 3 years (6 years for a legal entity). You declare your property income, with a 30% deduction under micro-foncier (if your property income does not exceed 15,000 euros per year), or by deducting your actual expenses under the real regime.
The real regime allows you to deduct loan interest, renovation work, property tax, management fees and insurance. If your expenses exceed your rent, you create a property deficit that can be offset against your overall income (up to 10,700 euros per year).
It is a stable regime, well known to bankers. However, it does not allow depreciation of the property, which is its main disadvantage compared to LMNP.
LMNP real regime: the advantage of depreciation
The LMNP real regime allows you to deduct the same expenses as unfurnished rental, plus a decisive advantage: accounting depreciation of the property and furniture. In practice, you deduct each year a fraction of the property's value (excluding land) and of the furniture.
The result: in most cases, the taxable income is close to zero, or even nil, during the first years. You receive rent but pay little or no tax on it. It is one of the few arrangements that allows you to receive virtually untaxed income.
LMNP micro-BIC offers a 50% deduction on receipts (capped at 77,700 euros per year). It is simpler but often less advantageous than the real regime as soon as you have a loan or significant expenses.
| Criterion | Unfurnished rental | LMNP |
|---|---|---|
| Tax regime | Property income | BIC |
| Depreciation | No | Yes (real regime) |
| Minimum lease | 3 years | 1 year |
| Flat-rate deduction | 30% (micro-foncier) | 50% (micro-BIC) |
| Tax optimization | Limited | Strong (depreciation) |
Comparing the two regimes on a real example
Take a flat purchased for 180,000 euros with 8,000 euros in annual expenses and 10,800 euros in rent. Under the unfurnished real regime, after deducting expenses and interest, you are taxed on approximately 2,800 euros of property income. Under the LMNP real regime, depreciation wipes out this taxable income: virtually no tax.
Over 10 years, the difference can amount to several thousand euros in tax savings. On Buy&Rent, you can view the comparison of all 4 tax regimes side by side for each simulated property.
The LMNP real regime becomes more advantageous as soon as your actual charges (interest + depreciation + management) exceed 50% of rent. Simulate both regimes before choosing.
How to choose the right regime
If you are buying a new property or carrying out major renovation work, the LMNP real regime is almost always more advantageous. If you have few expenses and modest property income, micro-foncier may suffice. If your renovation work creates a large deficit, the unfurnished real regime may be worthwhile to offset this deficit against your overall income.
In all cases, simulating both options before deciding is essential. The optimal regime depends on your personal situation: income, marginal tax bracket, loan amount, expected expenses.
Key takeaway
The choice between unfurnished and LMNP depends on your tax situation, planned holding period, and property type. Always simulate both options.