The Real Estate Wealth Tax has become a tax for seniors. More than two thirds of the 194,000 homes taxed now have more than 65 years oldand 37% over 75 years old. This shift is due to a heritage reality: baby boomers concentrate old and rental real estate, often acquired in the 1990s-2000s, when prices were tight in most metropolises and seaside resorts. The refocusing of the IFI on stone alone, unlike the former ISF, mechanically accentuates this demographic bias.
This results in a growing number of heirs crossing the entry threshold to 1.3 million euros after an inheritance and discovering an annual IFI cost between 5,000 and 20,000 euros depending on the composition of the assets, even though these assets are not very liquid. The good news is that there are effective shock absorbers to activate before or as soon as the inheritance is opened: dismemberment to isolate bare ownership, targeted donations, arbitration between conservation and transfer, and optimization of debts that are actually deductible. Finally, capping the IFI can avoid overtaxation when income is modest in relation to assets.
Succession: reflexes to avoid switching permanently to the IFI
Anticipating begins with dismemberment : transmitting bare ownership to children and retaining the life usufruct allows this value to be temporarily removed from their base, while preserving use or income. Donations of bare ownership, made upstream, freeze the tax base. At the opening of the successionwe must arbitrate without sentimentality: keep profitable assets and sell those with high costs and low returns. Debts are only deductible if they are real, due and allocated to taxable assets.
Capping and income management: paying off the bill without going broke
“Many taxpayers are implementing a strategy aimed at benefiting from the IFI capping mechanism provided for in article 979 of the CGI”specifies Igor Buttin, Associate Lawyer at Achille Avocats. Indeed, the accumulation of IFI and taxes due on income from the previous year cannot legally exceed 75% of revenue of the taxpayer. When the total taxes are greater than this share, the amount of IFI due is capped so as not to exceed this limit. He adds that “certain IFI payers choose to limit their income, by reducing their remuneration or deferring dividend payments for example, in order to benefit from this provision. This of course presupposes having liquid assets, or bank loans, enabling you to meet daily expenses..
Pitfalls to avoid, from second home to family SCI
Retaining a second home by attachment often maintains a high load and long-lasting IFI for poor performance. On the other hand, poorly calibrated family SCIs can cause debt deductibility to be lost or block transfer decisions. To secure everything, favor realistic assessments (occupancy discounts, obsolescence) and plan, from the succession, the transfers and financing over the year.
