FAQ - USA - Real property - Rental income

Real property – Rental income.

1 – I am a resident of the United States and I rent out a furnished property in France. What are my tax obligations in France?

Rental income from furnished property are considered as industrial and commercial income (BIC).

The tax regime applicable to such income when they are taxable should be taxed under the conditions of ordinary law (micro-BIC, auto-entrepreneur, régime simplifié or régime réel normal).

On form 2042 C PRO, part 5, fill in your gross income on line 5ND (half in 5ND and half in 5OD if you own the property jointly with your spouse). You’ll get a 50 % deduction, representing your expenses.

Professional dwelling renters (in particular, those that can justify annual revenue related to this activity above 23 000 euros) must hold a commercial accounting and comply with all reporting requirements and accounting of regular business.

If the renter believes that the micro-BIC regime is not favorable, he may opt for the “régime réel” (simplified tax regime or real tax regime). The option for the “régime réel” allows to take into account the charges actually incurred. The option must be made before February 1st of the first year for which the landlord wishes to be taxed under the “régime réel”.

2 - I am a resident of the United States and I rent out a property in France. What are my tax obligations in France?

Article 6 of the French-US tax treaty states that rental income are taxable in the country where the property is located. In this case, the property is in France, therefore the rental income is taxable in France. However it isn’t an exclusive taxation and your rents should be declared to the US tax administration. To avoid a possible double taxation, a tax credit will be deductible from the US tax.

The taxation of your rental income depends on the type of rental.

• If it is the rental of an unfurnished property : The income will be taxed as rental income « revenus fonciers ». They will be reported on tax form 2042 and possibly also on tax form 2044 depending on the chosen tax regime:

- If the total gross rental income (expenses not deducted) received by the household is lower or equal to 15 000 Euros, the “micro-foncier” regime applies. In this particular case, the taxpayer has to report his yearly gross rental income on line BE, page 3 of form 2042. He does not have to file the form 2044. The net taxable rental income is automatically computed by application, on the gross reported income, of a 30 % standard deduction, representing the expenses.

- If the total gross rental income (expenses not deducted) received by the household is higher than 15 000 Euros or by option on your part (option irrevocable for 3 years), then the “reel régime” applies. The rental income must be reported on French tax form 2042 and on attachment form 2044. On form 2044, fill in your detailed income and deduct your actual expenses (insurance, loan interests, repairs, renovation or maintenance work, property tax "taxe foncière").
Indicate the result in part 4 of form 2042 (line 4BA if it’s a profit).

A renter who should be taxed under the “micro-foncier” regime can opt for the “reel régime”, simply by filing a tax form 2044 with his tax form 2042. Please note that this option is irrevocable for three years.

♦ Since January 1st 2012, rental income of French origin received by a person that isn’t a resident of France is subject to social contributions at a rate of 15.5 % (Article 29 of the first rectified tax law for 2012 (# 2012-958 of August 16th 2012)).