Did you make a profit by selling a property you own? This capital gain is subject to the fixed rate income tax as well as social contributions. However, exemptions and deductions are possible under certain circumstances. Here’s everything you need to know about the real estate capital gains tax.
What Are the Tax Implications of a Property Sale?
A capital gain arises when you make a profit from a property sale. This gain is taxed at an income tax rate of 19% and social contributions at a rate of 17.2%. An additional surtax of 2% to 6% (calculated on the total taxable capital gain) is applied for real estate gains exceeding €50,000.
Taxation applies to capital gains from second homes, rental properties, commercial premises, land, and shares in property investment companies (SCPI) or real estate companies (SCI).
What Are the Possible Exemptions for Real Estate Capital Gains?
Capital gains from certain property sales are fully exempt depending on the property’s circumstances, or the buyer’s or seller’s situation.
Property Situation
The capital gains exemption applies to:
- The sale of a primary residence and its dependencies (yard, garage, parking space, etc.). This refers to your main and actual residence at the time of the sale.
- The sale of properties other than the primary residence, under two conditions: reinvesting all or part of the sale price within two years to buy or construct a primary residence and not owning a primary residence in the four years preceding the sale.
- All properties held for over 22 years: exempt from income tax.
- All properties held for over 30 years: also exempt from social contributions.
- Transactions under €15,000.
Seller’s Situation
Additionally, capital gains exemption applies to sellers who are:
- Retirees receiving a pension and residing in a care home.
- Holders of a disability card or living in a care facility for disabled adults.
- Non-residents of France.
- Not owning a primary residence for the past four years but owning a secondary residence that qualifies for exemption.
Buyer’s Situation
You may benefit from a tax exemption if the buyer is:
- A housing organization for social purposes or a private operator committed to building social housing.
- Expropriated due to a declaration of public utility and reinvesting their compensation in property purchase or construction.
- Exercising their right of abandonment and selling their property, provided their compensation is reinvested within one year.
It is advisable to get a property valuation from a professional to determine a selling price in line with market trends.
How to Calculate the Real Estate Capital Gains Tax?
To determine the gross capital gain, calculate the difference between the selling price of the property and its purchase price. Then deduct any abatements to obtain the taxable amount of the gain, known as the net capital gain. There are two types of abatements:
- Abatement for holding period: the rate for income tax ranges from 6% for the 6th to the 21st year of ownership to 4% for the 22nd year. For social contributions, the rate ranges from 1.65% to 1.6% for the same periods. After the 22nd year, the abatement rate is 9%.
- Exceptional abatement: 60% for zones A, A bis, or B1 and 70% for areas covered by urban development or national interest revitalization operations.
For instance, if you sold a property held for 15 years and realized a capital gain of €60,000, with a 60% abatement, you receive a deduction of €36,000. The taxable amount is thus €24,000 (€60,000 – €36,000). With a 19% tax rate, you would owe a tax of €4,560.
To calculate the real estate capital gains tax, simply determine the actual sale price and the purchase price. To qualify for exemptions or abatements, consider the property’s circumstances, purchase price, expenses, the seller’s or buyer’s situation, and holding period. It is recommended to consult a real estate professional or notary to secure your property sale.
