Dear investors, tax filing season is open! And for you who have chosen to invest in short-term rentals, this statement is of paramount importance: tax obligations must be fully respected to avoid penalties or subsequent complications. In addition, the rules surrounding the taxation of short-term rentals are constantly evolving, which adds an additional layer of complexity.
The 2024 finance law brings several significant changes: the income thresholds for the various tax regimes, the calculation of deductible expenses, as well as the tax rates and possible tax reductions applicable. But are these new rules applicable for filing your 2023 income?
In this practical guide, we will discuss the complex topics of your tax return related to your short-term rental business and share with you our expertise on this tax event.
As a reminder, there are two main tax regimes concerning short-term rentals: the micro-BIC regime and the Simplified Real regime.
This regime is intended for taxpayers whose annual rental income does not exceed a certain threshold. Declarants under this regime automatically benefit from a 50% lump-sum deduction on their rental income, which simplifies the reporting process. This means that only half of rental income is subject to tax, with no need to deduct actual expenses.
This regime is applicable to taxpayers whose annual rental income exceeds the threshold set for the micro-BIC regime, or to those who voluntarily choose this regime to accurately deduct their actual expenses. Net income is calculated by subtracting all expenses related to rental activity (such as maintenance costs, loan interest, or management fees) from gross rental income.
For complete information on this subject, discover our Short-Term Rental Tax Guide.
While the 2024 Finance Law brings new changes that make the micro-BIC regime less interesting than the Simplified Real System (modification of the allowance, adjustment of the calculation of expenses), the Council of State decided on March 19 last year that for the 2023 income declaration, the taxpayer could choose between applying the new system or the old one in terms of LCD.
In the new system, the 2024 finance law imposed new rules on the taxpayers concerned, in particular by lowering the income threshold for the micro-BIC regime to 15,000 euros and by reducing the lump-sum allowance to 30%. This law therefore makes the choice of the Simplified Real System more appropriate.
However, the Council of State decided that taxpayers whose 2023 rental income is less than 77,000 euros could benefit from the micro-BIC regime provided for by the old system for their 2024 declarations. Thus, they always benefit from a flat rate reduction of 50%.
This decision mainly concerns furnished tourist renters who have not had their accommodation classified. For those with classified housing or renting for a long term, the thresholds and allowances remain unchanged: 188,700 euros threshold for classified housing with a 71% reduction.
Completing your short-term rental income tax return correctly requires following several key steps.
Before you get started, make sure you have all the required supporting documentation. This includes statements of rental income from your business, as well as bills for related charges and expenses, such as maintenance costs, loan interests, and other costs associated with managing your rental property.
The declaration of short-term rental income is mainly done via the 2042-C PRO form.
For the micro-BIC diet:
If your rental income is below the established threshold (72,600 euros for 2024), you can opt for the micro-BIC regime. In this case, you simply have to declare your gross rental income on this form, automatically benefiting from a 50% flat rate allowance.
For the Simplified Real regime:
If your income exceeds this threshold or if you want to accurately deduct your actual expenses, you can opt for the Simplified Real Plan. In this case, you must declare your gross rental income and then subtract all eligible actual expenses. These must be detailed and justified by the invoices collected previously.
As tax filing season kicks off, it's crucial to understand recent tax developments. Our guide offers you key strategies to optimize your 2023 LCD income tax return.
At OIQIA, our service includes legal and fiscal monitoring. Our experts support our clients in choosing the tax regime that allows them to optimize the income from their short-term rental investment.
To find out more about the latest news in tourism and short-term rentals,
subscribe to our newsletter.
