TheImpôt sur la Fortune Immobilière (IFI) is an annual tax that has replaced the Impôt de Solidarité sur la Fortune (ISF) for real estate assets since 2018. It applies to real estate assets with a net taxable value in excess of 1.3 million euros. XVAL, the IFI real estate valuation firm, offers you an article to help you better understand the rules applicable to the IFI in France.
IFI calculation rules
The IFI is calculated on the basis of the market value of the real estate owned by the taxpayer, after deduction of debts incurred for the acquisition, renovation or improvement of the property.
The IFI tax rate varies between 0.5% and 1. 5%, depending on the net taxable value of the property. Those liable for the IFI must file a declaration of assets with the tax authorities, usually in May of each year.
Calculated in brackets, the IFI scale is progressive, as for income tax.
- Under €800,000: 0%.
- Between €800,000 and €1,300,000: 0.50
- Between €1,300,000 and €2,570,000: 0.70
- Between €2,570,000 and €5,000,000: 1%.
- Between €5,000,000 and €10,000,000: 1.25%.
- Above €10,000,000: 1.50%.
Important! If you have made donations to charitable organizations in the year prior to the date of your IFI tax liability, you can reduce the amount of your IFI tax liability. The reduction is equal to 75% of the amount of the donations, up to a limit of €50,000.
Which properties are included in the IFI real estate valuation?
Only taxpayers with taxable real estate assets in excess of €1.3 million will be liable for the tax. The following properties are concerned:
- built property (house, apartment, cellar, etc.) owned in France and abroad if the taxpayer is domiciled in France.
- bare land (building land, woodland, agricultural land, etc.).
- buildings under construction on January 1.
- assets held in usufruct.
- assets held indirectly (shares in a company or organization, or through a life insurance policy, for example).
Property used for professional purposes (premises, workshops) may, under certain conditions, be excluded from the calculation of the IFI base. The same applies to woods and forests under a management commitment or for professional use, to rural property leased on a long-term basis or for professional use (agricultural land and buildings, etc.), to furnished accommodation leased under the tax regime for professional furnished tenants, and to holdings in company capital if you own at least 10% of the company's capital.
Assets held in bare ownership are not taxable , except in cases where the law provides for taxation divided between the usufructuary and the bare owner according to a scale based on the age of the usufructuary.
- The tax authorities' recommendations for valuing real estate: https: //xval.fr/valorisation-sci-ifi/
- Have XVAL's experts carry out a valuation: https: //xval.fr/valorisation-immobiliere/
Possible exemptions from the IFI
Certain situations qualify for total or partial IFI exemption. Here are the main exemptions available:
- Professional property : real estate used for professional purposes is eligible for full IFI exemption. This exemption applies to property held directly or through a company, provided that the activity is carried out on a professional basis and that the taxpayer plays a significant part in it.
- Rural property: real estate used for farming, forestry or wine-growing may qualify for partial exemption from the IFI. This exemption applies to property held directly or through a company, provided that the activity is carried out on a professional basis and that the taxpayer has a significant stake in it.
- Donations and bequests : real estate donated or bequeathed to a charitable foundation or association is fully exempt from the IFI.
Obtain a property valuation for your IFI tax return:
Possible discounts
There are several ways to reduce the amount of IFI payable. Rented properties, whether furnished or unfurnished, can benefit from a significant discount ranging from 10% to 30%, depending on the length of the remaining lease and the quality of the tenant in place.
Principal residences are eligible for a 30% discount, provided they are not held in an SCI (non-trading property company).Properties held in joint ownership or in dismemberment can also benefit from a discount ranging from 10% to 30% of their market value.
Similarly, property held through an SCI , after excluding business assets, may be subject to a discount of around 10% to 20%. The discount varies according to the difficulty of resale, either because of the articles of association or because of the number of partners, making transactions on property held by the SCI all the more difficult.
Finally, theIFI is calculated on the net value of your taxable assets on January 1. "Net" means after deduction of discounts, but also of certain debts relating to a certain number of expenses. For example :
- the purchase on credit of real estate or shares in companies or stocks (in proportion to the value of taxable real estate);
- improvement, construction, reconstruction or extension work;
- maintenance work usually carried out by you or on behalf of the tenant, for which you have not been able to obtain reimbursement by December 31 of the year in which the tenant left;
- the payment of taxes linked to taxable assets, such as property tax (note: council tax is not deductible) or inheritance tax. On the other hand, taxes on property income are not deductible.
To be deductible, debts must meet 3 cumulative general conditions:
- exist on January 1 of the tax year;
- be the personal responsibility of a member of the tax household within the meaning of the IFI and actually borne by him or her;
- be related to taxable assets ;
Please note! Even if these 3 conditions are met, some debts are not deductible:
- this is the case if the value of the real estate exceeds 5 million euros and the total amount of debts shown as deductible in any one year exceeds 60% of this value (i.e. over 3 million euros). In this case, only 50% of debts in excess of the threshold are deductible. For example, in the case of taxable assets worth 5 million euros, if debts total 4 million, only a total debt of 3.5 million can be deducted;
- finally, debts relating to the acquisition of fully exempt assets are not deductible.Debts relating to partially exempt assets are deductible only to the extent of the non-exempt portion. For example, if the value of a property is 3 million euros and the exemption is 30% (i.e. 900,000 euros), the debt can only be deducted from a value of 2.1 million euros.
Why have XVAL draw up an IFI property valuation?
Given the complexity of real estate valuation, it may be advisable to call on a specialist firm such as XVAL to carry out a precise estimate of the value of your real estate assets, which will be subject to the IFI calculation (exclusion of assets not concerned, application of exemptions and discounts, etc.).
XVAL's experts have extensive experience in property valuation, and will help you optimize your IFI return by taking advantage of the various discounts and exemptions available. In 95% of cases, the IFI reduction more than covers the valuation fees.
- Have XVAL's experts carry out a valuation: https: //xval.fr/valorisation-immobiliere/
In conclusion, the IFI is a complex tax, but one that also offers numerous opportunities to reduce the amount payable. By calling on an expert to evaluate your real estate assets, you can maximize these opportunities and considerably reduce your tax bill.
Find out more about the "IFI" real estate valuations offered by XVAL :
