Rental Property Depreciation: A Project Lacking Credibility

Context

The 2026 finance bill has caught the attention of the French real estate sector with an ambitious proposal: allowing private landlords to depreciate their unfurnished rental properties. If enacted, this measure would represent a major upheaval in French real estate taxation.

Currently, depreciation of rental real estate is mainly reserved for furnished rentals (LMNP/LMP) and commercial companies. Individual landlords who rent unfurnished properties cannot deduct the depreciation of their property from their rental income, unlike their counterparts who rent furnished properties.

This tax asymmetry has long been criticized by industry professionals, who see it as an unbalanced incentive favoring furnished rentals over unfurnished rentals, which nevertheless constitute the majority of the French rental stock.

The Proposed Mechanism

Depreciation Principle

Real estate depreciation consists of fiscally deducting the theoretical depreciation of a property over its useful life. Concretely, an investor could deduct each year a fraction of the property's value from their rental income.

Simplified example:

• Property acquisition: €300,000
• Depreciation period: 30 years
• Annual depreciation: €10,000 (300,000 / 30)
• Tax impact: significant reduction in taxable income

Envisaged Terms

The reform would propose:

• Linear depreciation over 25 to 30 years
• Application to new and existing acquisitions
• Deduction limited to rental income amount (non-carryforward deficit)
• Possible overall cap on tax benefits

Reasons for Skepticism

1. Considerable Budget Cost

One of the main criticisms concerns the financial impact on the State. Estimates suggest several billion euros in annual tax revenue loss. In a context of public deficit reduction, this measure seems difficult to sustain.

Key figures:

• Approximately 3.5 million individual landlords in France
• Private rental stock: 7 million properties
• Estimated tax loss: €3-5 billion per year

2. Mainly Affluent Beneficiaries

Opponents emphasize that this measure would primarily benefit households already possessing substantial real estate assets. Small landlords, often minimally or not taxed on their rental income, would derive limited benefit.

The redistributive effect would therefore be limited, if not counterproductive from a tax fairness perspective.

3. Uncertain Impact on Rental Supply

While the stated objective is to stimulate rental investment and increase housing supply, nothing guarantees this measure will produce the expected effects.

Pending questions:

• Will investors take advantage of the tax benefit without creating new housing?
• Will the scheme encourage current owners to sell rather than rent?
• Will the impact on rents be neutral or inflationary?

4. Additional Administrative Complexity

Introducing depreciation for individuals would require:

• More rigorous accounting
• Multi-decade tracking
• Harmonization with other tax regimes (wealth tax, capital gains, etc.)
• Enhanced tax audits

This complexity could deter small landlords and generate significant management costs for the tax administration.

5. Discouraging Precedents

Previous tax schemes (Scellier, Pinel, Duflot) have shown their limitations:

• High costs for public finances
• Significant windfall effects
• Limited impact on housing crisis
• Real estate market distortions

Economists therefore remain skeptical about the effectiveness of another tax advantage of this magnitude.

Impact on Landlords

Optimistic Scenario: Reform Adoption

Potential advantages:

• Significant reduction in rental income taxation
• Improved net profitability of rental investments
• Incentive to maintain and upkeep rental properties
• Alignment with furnished rental regime

Numerical example: An investor with €20,000 annual rental income and €10,000 depreciation could see their taxable income halved, generating tax savings of several thousand euros per year.

Pessimistic Scenario: Rejection or Dilution

Consequences:

• Maintenance of status quo unfavorable to unfurnished rentals
• Continued conversion to furnished rentals
• Pressure to sell for small landlords
• Increased tension in the rental market

Points of Vigilance

Even if adopted, several pitfalls lurk:

1. Depreciation recapture: deducted depreciation could be reintegrated upon resale, diminishing the scheme's appeal.

2. Overall tax shelter cap: the €10,000 cap could limit the advantage for large estates.

3. Doctrine change: a future government could modify or eliminate the scheme, creating legal uncertainty.

Verdict and Advice

A Politically Fragile Project

Given the analyzed elements, the likelihood of adopting this reform in its current form appears low. Budget constraints, equity criticisms, and effectiveness doubts weigh heavily in the balance.

It is more likely that:

• The measure will be abandoned
• Or significantly reduced (partial depreciation, limited duration, strict caps)
• Or reserved for certain tight-market areas or properties meeting specific criteria (energy performance, for example)

Recommendations for Landlords and Investors

Short term:

1. Do not base your investment decisions on this hypothetical reform
2. Continue optimizing your tax situation with existing tools (expense deduction, work, loan interest)
3. Stay informed of project developments during parliamentary debates

Medium term:

1. Consult a tax or wealth advisor to anticipate different scenarios
2. Diversify your rental investments (furnished/unfurnished, residential/commercial)
3. Prepare your accounting in case the scheme is adopted (property valuation, acquisition date, etc.)

Long term:

1. Adopt a flexible wealth strategy capable of adapting to tax changes
2. Prioritize quality and intrinsic profitability of your investments over tax advantages alone
3. Monitor new schemes that might emerge (energy transition, social housing, etc.)

Conclusion

Depreciation of unfurnished rental properties remains, at this stage, a project attractive on paper but lacking credibility in practice. Between budget constraints, equity criticisms, and effectiveness uncertainties, obstacles are numerous.

For landlords and investors, caution is advised. Rather than betting on a hypothetical reform, focus on:

• Rigorous management of your existing assets
• Tax optimization with current tools
• Diversification of your investments
• Professional support adapted to your situation

Call to Action

Are you a landlord or considering investing?

Don't let tax uncertainties paralyze your wealth strategy. Consult a specialized tax advisor to:

• Analyze your current situation
• Optimize your taxation with existing schemes
• Prepare different evolution scenarios
• Anticipate the impact of this reform should it materialize

Schedule an appointment with an expert

Learn More

• Complete Guide to Real Estate Taxation 2025
• Furnished vs Unfurnished Rental: Which Regime to Choose?
• Optimizing Rental Income: Best Strategies

Sources:

• Capital.fr - "Rental Property Depreciation: A False Good Idea?"
• La Tribune - "Real Estate Taxation: 2026 Reform Issues"
• General Directorate of Public Finances (DGFiP)
• National Union of Real Estate Ownership (UNPI)

Article published on October 28, 2025 - Last update: October 28, 2025