The tax burden in France remains high compared to other European countries. For high-income households, the i nvestment property tax exemption is an opportunity to avoid paying too much tax. In fact, while preparing for a future retirement thanks to additional property income, the investor benefits from an attractive tax reduction of up to 21% under the Pinel law .
Bank financing for maximum tax exemption
When you want to make a rental project a reality, it is often more interesting to use debt financing when possible. Indeed, this allows the investment amount to be amortized over several years. Especially since interest rates are very low now. The cost of a mortgage taken out today is therefore reduced compared to previous years. You should know that loan interest, or the price of the loan, is also deductible. In short, it is a way to maximize your tax exemption.
From a heritage perspective, credit financing makes it possible to secure your project. Indeed, in the event of unforeseen circumstances (death, disability, illness), the credit is reimbursed. If the current tax exemption laws do not require credit financing, it is strongly advised. In this sense, the tax gain will be attributed in part to the savings effort to pay the monthly loan payment. On sale, the loan is then repaid and investors have kept their precautionary savings.
In the event of repurchase of credits during amortization, according to some it is necessary to ensure to keep the loan in the state in order to preserve the tax gain. For others, the repurchase of the tax exemption financing is possible provided that the repurchase offer refers to the original loan agreement. We recommend that you take precautions against tax rules and therefore do not replace the initial financing with a substitute loan.
Choose the best financing conditions
Setting up a home loan is never a trivial step. A loan commits you over several years, and as such you must make the best choice. As this is a loan dedicated to a rental investment , it is advisable to think in terms of monthly payment. This must be close to the estimated amount of land income that will be released. The repayment effort from the owners must be as light as possible to keep the family budget balanced. We must not forget that the purpose of an investment in tax exemption is above all to reduce taxes before building up real estate.
Investors should not fear long repayment periods, most of the time a tax exemption loan is reimbursed before maturity following the sale of the property, at the end of the tax exemption period.
Finally, we must take into account the nature of the real estate investment. Most of the tax exemption laws are devoted to the new market (sale in the future state of completion), so there is a construction period during which the taxpayer will not receive the property income. To avoid a budgetary imbalance, it is better to provide for a grace period in the financing conditions.
Discover the link of the Portal of the Economy and Finances to know everything about the Pinel Law