How is the property tax calculated?
The property tax is a local tax collected each year by local authorities and due, except exemptions, by all the owners of real estate located in France on January 1 of the year. It is seated on the cadastral rental value of taxable properties, which is supposed to correspond to the theoretical annual rent that they could generate if they were put on the market, reduced by a flat-rate reduction of 50%. This basis applies a tax rate voted each year by each local authority according to its budgetary needs. Result: two comparable dwellings can be subject to very different charges depending on the municipality in which they are. Note that certain properties can nevertheless benefit from an exemption from property tax, such as new housing for residential use, which are exempt from property tax for two years.
From a technical tax to a property wealth tax
Thus, the property tax is due due to the quality of owner, regardless of the rental income actually generated. Historically considered as a “technical” taxation, and having the main vocation of ensuring the financing of local authorities, its growing weight with regard to the value of goods and their profitability tends to modify its perception. As the property tax increases, it is increasingly similar to a property asset tax, but which, unlike the IFI, affects all of the landowners, without trigger threshold and without progressiveness according to the overall value of the heritage.
How do successive increases be explained?
The increase in property tax for property owners results mainly from two factors:
• On the one hand, Inflation indexing (measured from the harmonized consumer price index) is directly taken into account during the annual revaluation of rental values serving as a basis for housing tax – which explains the more marked increase observed in recent years on housing ( +3.9% in 2024 and +7.1% in 2023, on average) that on professional premises, for which the tax ( +1.1% in 2024 and +0.9% in 2023);
• on the other hand, but to a lesser extent, the gradual abolition of the housing tax on the main residences, which has led many communities to correlate the property tax rates to compensate for their loss of resources.
Individuals very affected by the increases
In 2024, the product of the property tax on built properties increased by 5.7% for individuals, 1.4 points more than the increase observed for companies.
Admittedly, a ceiling mechanism exists and allows, under certain conditions, to obtain a tax tax reduction when it exceeds 50% of the tax income of the tax household. But it remains in practice inconvenient: the reduction (i) is not automatic and supposes the filing of a complaint, and (ii) it only benefits a limited number of households, given the threshold fixed by the device (50% of income) which, even when reached, often limits the amount of the reductions obtained.
For the vast majority of owners, the property tax is therefore now established as a real property tax, the weight of which may remain high in the coming years. An element to be taken into consideration in the event of real estate acquisition.
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