“What work can I do to tax as much as possible ?»asks a rental investor point blank, during a workshop at the Salon de la copropriété, which is taking place in Paris this Wednesday, November 5 and Thursday, November 6. “This is one of the frequent questions we get asked”smiles Denis Jacques, president of the National Union of Real Estate Owners (Unpi) in Gironde. The answer to this question depends on the type of rental and your accounting regime as a rental company.
In bare rental as in furnished rental, you must opt for the actual tax regime (as opposed to micro-property and micro-BIC (industrial and commercial profits)) to deduct from your rental income the costs linked to housing, including work expenses. The objective being to generate charges higher than rentsin order to create a land deficit or a BIC deficit, which will reduce your overall income and, consequently, your tax.
Expansion work is not deductible
In the case of a bare rental, the work expenses, concerning your accommodation or the co-ownership, that the owner can deduct from his rental income are those linked to “maintenance, repair and improvement»indicates Marie-Chantal Caprice, independent lawyer. Construction and expansion work, such as the creation of rooms in an attic or a shed in the garden, are however not deductible from your rent.
In furnished rentals, only maintenance and repair work is deductible. Improvement work is not, but it is depreciable, like construction work, that is to say that the owner can deduct an identical fraction each year, for several years. What exactly do we mean by improvement works ? “This involves the renovation of the bathroom, thermal insulation or the installation of a home automation system”illustrates Marie-Chantal Caprice. Maintenance includes, for example, painting work and checking equipment. As for repair work, it may involve replacing a broken boiler or, at the level of the co-ownership, changing an outdated elevator or repairing a roof in the event of water infiltration.
Beware of the tax reclassification of the work
“Please note, the nature of the work is the main cause of tax reclassification of deductible expenses”warns Céline Mahinc, vice-president of the Anacofi Immo brokers association. It must be said that the distinction is sometimes subtle: do you think you can deduct from your rent the renovation of the staircase, damaged by the arrangement of rooms in the attic? You are completely wrong! “The staircase is inseparable from the atticwhich has been the subject of development work not deductible from rental income”explains Céline Mahin.
Another piece of advice given by the expert: keep all your invoices! Not receipts from DIY stores, which “don’t work” as supporting documents to the tax administration, but the invoices from construction companieswhich specify the address of the construction site. If you have undertaken repair work but also extension work, the invoice must separate them so that the former can be deducted from your rental income. Please note that if the extension work is not deductible from the rent while you own your property, it can, however, be deducted from the capital gain if you resell the accommodation. On condition, again, to bring the invoice to the notary in charge of the sale!
