A mortgage to repay? It is possible to deduct interest from taxable income in order to pay less tax in 2022. But everyone is not necessarily entitled to the deduction of their loan interest…
Reduce your 2023 tax when you have taken out a mortgage? It is possible, at least for some, thanks to the deduction of mortgage interest. You still have to be entitled to it. Explanations.
Which loan is eligible for deduction from income tax?
- Rental property, main or secondary residence: deduction of loan interest or not?
- Principal residence: is the deduction of mortgage interest possible?
- Tax deduction if the mortgage was issued before 2011
- Real estate loan in 2021 or 2022: no tax deduction
- 40% tax credit for the purchase of BBC accommodation 2005
- No more deduction of loan interest in the old or new non-BBC
- How a mortgage can reduce your taxes
- Maximum amount of tax credit on loan interest
- How to declare?
- Rental property, SCPI: interest deductible from property income
- Rental property loan: deduction of interest in the actual tax regime
- Rental property loan in the event of an option for the micro-land regimeSCPI: deduction of loan interest excluding micro-property
- What deduction for a real estate purchase in SCI?
Rental property, main or secondary residence: deduction of loan interest or not?
Loan interest can provide a tax benefit, but not for everyone or necessarily under the same conditions from one taxpayer to another.
Loans eligible for tax credit or deductible interest only concern:
- the main residence, subject to conditions (date of acquisition, issue of the loan offer, type of property)
- Rental real estate, subject to conditionsinvestment.
- in SCPI shares (civil property investment companies) , subject to conditions.
On the other hand, loan interest does not entitle you to any tax advantage if the mortgage has been used to finance the purchase of a second home, for personal use.
Principal residence: is the deduction of mortgage interest possible?
Tax deduction if the mortgage was issued before 2011
2011Can we deduct the interest on a loan linked to the purchase of our main home? Yes in a very specific situation, under certain conditions. The law provides (Article 200 quaterdecies of the CGI – General Tax Code) for the possibility of deducting mortgage interest, but only under conditions, for the acquisition of certain dwellings and for a limited period of time. This deduction takes place through a tax credit mechanism (which benefits all taxpayers, taxable or non-taxable ). This device is on the way to extinction; very few people can claim it.
The tax credit on borrowing interest is legally granted only in respect of home loans contracted on 1 January 2011 at the latest. The date taken into account is the date of issue of the loan offer. Similarly, the tax credit has been removed for investments made since October 1, 2011, even if the loan offer was issued before January 1, 2011.
Borrower insurance and sureties (mortgage or deposit of the Crédit Logement type) are not included in the calculation of the loan interest taken into account to determine the tax credit.
Real estate loan in 2021 or 2022: no tax deduction
Thus, in the event of a real estate purchase in 2021 or 2022 with a view to becoming the owner of his main residence, the taxpayer does not benefit from any tax reduction or any tax deduction in the following years for loan interest. of the home loan used to finance the acquisition.
Indeed, any loan offer issued after January 1, 2011 and any acquisition transaction carried out after September 30, 2011 does not give rise to the tax credit. No other device of the same type was put in place thereafter.
40% tax credit for the purchase of BBC accommodation 2005
In the 2021 income declaration for the calculation of the 2022 tax, only certain dwellings are eligible for the tax credit on mortgage interest: this almost exclusively concerns cases of acquisition of a house or a BBC apartment (low consumption building label 2005). Interest paid in 2021 in this respect should be entered in box 7VX of the income tax return.
For 2021, the system is still in force for interest linked to loans relating to acquisitions made in 2010 or 2011.
The duration of the tax credit is 7 years: it is granted for the first 7 installments of the payment schedule, ie 7 years of 12 consecutive months. The tax credit rate amounts to 40% of loan interest.
In the event of a property purchase made in 2011, the tax credit applies under the following conditions:
- the loan offer must have been issued before January 1, 2011
- the acquisition must have been made no later than September 30, 2011 for the purchase of a completed home or off-plan (sale in the future state of completion, which corresponds to the purchase of an apartment on plans within a new building program)
- the declaration of opening of the work site must be made no later than September 30, 2011 for a single-family house construction operation.
No more deduction of loan interest in the old or new non-BBC
Until 2017 for the year 2016, it was possible to deduct five repayment installments, i.e. 12 consecutive monthly payments for five years for operations other than the purchase of new BBC real estate. The tax credit rate was set at 20% interest for the purchase of old housing or 10% for new non-BBC housing.
Maximum amount of tax credit on loan interest
The tax advantage is limited, the interest taken into account for the calculation of the tax credit being subject to a ceiling. This ceiling varies according to the composition of the tax household, i.e.:
- 3,750 euros in interest for a single person
- 7,500 euros for a couple+
- increase of 500 euros per child or dependent (250 euros in case of shared custody).
For a person holding a disability card, the deduction is doubled, i.e. a ceiling:
- 7,500 euros in annual interest for a single person
- and 15,000 euros for a couple.
And in case of renegotiation of credit ? Nothing changes: you can continue to deduct but only within the limit of the interest fixed in the initial repayment schedule.
How to declare?
To benefit from the deductibility of loan interest to reduce their 2022 tax, the taxpayers concerned must complete form 2042 RICI and go to the first page of this form. For an online tax return, on impots.gouv.fr, Internet users must tick the Tax reductions and credits box in the Expenses section displayed during the third step of the online declaration. In any case, simply fill in box 7VX the sum of interest paid in 2022.
Rental property, SCPI: interest deductible from property income
Rental property loan: deduction of interest in the actual tax regime
In the case of rental investment, the law allows the taxpayer to deduct loan interest from property income. More specifically, it is possible not only to subtract the interest paid but also the costs paid for obtaining the loan: application fees, surety, mortgage registration, commissions and bank charges, borrower insurance … And this, without any limit as long as it is a matter of deducting them from rental income.
The loan must finance the acquisition, reconstruction or expansion of a building or its repair or improvement. It can also be used to cover expenses related to the conservation of the property of the declarant(s).
An example of conservation expense: the interest on a loan taken out to cover inheritance or donation costs when you benefit from the free transfer of one or more rental properties.
Still, not everything is allowed. An owner-lessor who would have concluded the year 2021 in land deficit (more expenses than land income), can certainly deduct the excess expenses from his overall income within the limit of 10,700 euros… but not the loan interest .
On the other hand, you can defer the excess interest to your property results for the next ten years, in order to reduce your future taxable rental income.
Please note: in the event of sale of the property or change of use (cessation of the rental, synonymous with non-collection of property income), the taxpayer is no longer authorized to deduct the interest from the loan taken out to finance the purchase of this property.
In the tax return , the interest charges must be indicated:
- in declaration 2044 for a bare rental, line 250 (loan interest), section 410 (lender, date of loan and interest paid for each property)
- in the 2031 declaration for a furnished rental (please note this is a special declaration to be made separately, apart from the actual tax declaration); in this case, it is better to use the help of a chartered accountant to properly complete your tax return.
Rental property loan in the event of an option for the micro-land regime
Under certain conditions (bare rental, annual amount of gross land income less than or equal to 15,000), a tax household can opt for the micro-land regime.
The option for the micro-foncier regime does not allow loan interest to be deducted. Why ? Because loan interest is taken into account in the calculation of the standard 30% allowance (this allowance is representative of charges but not for their actual amount) which is automatically applied by the tax authorities. The tax base is therefore equal to 70% (0.7 times) the amount of rental income received.
In this case, it is only necessary to declare the amount of rent received in 2021 box 4BE (amount of gross receipts without abatement).
SCPI: deduction of loan interest excluding micro-property
The taxation of yield SCPIs is not very favorable for units acquired by cash payment: the tax regime is generally the same as the rents of an owner-lessor (interest subject to the income tax scale without allowance, nor application of the 30% flat tax on capital income).
It is no coincidence that one of the most popular modes of acquiring SCPI shares is investment on credit: in this case and as in the case of a classic rental investment, interest is deductible.
One notable difference, however, is that the total income to be declared is not necessarily equal to the dividends paid by the SCPI to the partners, the tax base for unitholders corresponding to their share of the taxable result of the SCPI. Moreover, interest is only deductible up to the real estate income received by the SCPI (financial income should not be taken into account for the income base subject to a deduction).
For people who do not opt for the micro-foncier regime, the procedures for declaring interest on borrowing SCPI shares financed on credit are as follows:
> If property income is derived exclusively from SCPI shares
You only need to use the basic tax return (form 2042), without an additional form. All you have to do is enter the amount of your property income net of loan interest paid during the year, cade 4BA (“taxable property income”).
In the appendix (on plain paper for the paper declaration or in the “additional information” box), you must indicate:
- the contact details of the SCPI(s) with which we are associated
- the amount of net property income per company
- the amount of interest on personal loans
It is also recommended to attach a loan interest certificate from the bank that granted the loan.
> If the property income is mixed (SCPI shares and classic rental property)
In this case, you must complete the main declaration (form 2042) and a 2044 declaration in the event of an option for the real tax regime (“Declaration of property income”).
The total loan interest deductible from property income should be mentioned in box 432 (“Total loan interest”) in the event of a property deficit. You must also specify the name and contact details of the lender, as well as the date of the loan and the amount of interest paid line 410.
What deduction for a real estate purchase in SCI?
In the event of real estate investment through a civil real estate company (SCI) subject to income tax (IR), the partner is taxed on his share of property income. Therefore, the taxpayer is entitled to the same deduction as a “classic” lessor, in the event of taking out a personal loan to bring new money to the company or to acquire shares.
In addition, it is possible to deduct the interest on a loan taken out by the SCI itself to acquire or renovate assets, up to its share of the capital.
The declaration procedures vary according to the composition of the assets and are similar to the declaration for SCPI unitholders.
> Property income only from an SCI
In this case the declarative obligations are limited, there is no need to use the specific property income declaration form (only the 2042 declaration is necessary). You simply have to indicate box 4BA the amount of taxable land income (= net land income after deduction of loan interest by the taxpayer himself).
There remains only a few additional information to communicate to the administration in the “additional information” box (or on plain paper): contact details of the SCI, amount of the result and amount of loan interest.
> Mixed property income (SCI and rents from a building held directly)
On declaration no. 2044 (“Declaration of property income”), the income from SCI shares must be declared in box 110 and specify:
- line 111: gross incomeline
- 112: costs and charges excluding loan interestline
- 113: interest on loans taken out by the SCIline
- 114: the profit or deficit observed.
The total is to be reported in boxes A, B, C and D.
To complete your declaration, you can refer to the annual certificate issued by the SCI (supporting document to be kept in case of request from the personal tax department ).
