Déficit foncier 2026: deduct up to €21,400 against your global income through renovation works
In short
Under the real property-income regime (unfurnished), when your deductible expenses excluding interest exceed your rents, the déficit foncier offsets your overall income up to €10,700/yr — raised to €21,400/yr for an energy renovation moving the home from E/F/G to A/B/C/D (until 31 Dec 2027). Any excess, and the interest portion, carries forward against property income for 10 years.
The déficit foncier (rental property loss carry-forward) allows you to offset the costs of a rental property (works, mortgage interest, property tax, etc.) against your global income when those costs exceed the rents received. Standard cap: €10,700/year against global income. Enhanced cap of €21,400/year for energy-renovation works until 2027. It is one of the rare mechanisms that reduces the taxable base on the total income of the tax household, not merely on rental income.
Principle: when charges exceed rental income
In bare rental (location nue) under the actual-expenses regime (régime réel foncier), you deduct your actual charges from your rental income. When the total charges exceed the rents, you have a déficit foncier.
That deficit can then be offset against your global income (salary, professional income, etc.) to reduce your overall taxable base — which is far more powerful than a simple deduction against rental income alone.
The two components of the deficit: a fundamental rule
The déficit foncier is calculated in two stages depending on the nature of the charges.
Stage 1 — Mortgage interest
Mortgage interest is deductible against rental income only, never against global income. If your interest exceeds your rents, the surplus is carried forward against rental income over the following 10 years — with no cap on the amount.
Stage 2 — Other charges (works, property tax, insurance, management fees, etc.)
These charges are offset against the result after deduction of interest. If that result is negative, the resulting deficit is offset against global income up to a limit of €10,700/year (or €21,400 for eligible energy-renovation works).
Calculation flow:
| Step | Calculation | Impact |
|---|---|---|
| Gross rents | €8,000 | — |
| − Mortgage interest | − €3,500 | Offsettable against rental income only |
| Intermediate result | €4,500 | — |
| − Other charges (works, property tax, etc.) | − €18,000 | — |
| Déficit foncier | − €13,500 | — |
| Offsettable against global income | €10,700 (cap) | Reduces tax on all income |
| Carry-forward against future rental income | €2,800 | Carried forward 10 years |
The 2026 offset caps
Standard cap: €10,700/year
The deficit generated by charges other than interest can be offset against global income up to a limit of €10,700 per year per tax household (General Tax Code, art. 156 I 3°).
Any surplus beyond this cap is carried forward against rental income over the following 10 years, with no cap on the amount — it is not lost, but cannot reduce global income.
Enhanced cap: €21,400/year (energy-renovation works)
For energy-renovation works that improve a property rated E, F or G to at least class D, the cap is doubled to €21,400/year against global income.
Conditions:
- Quote accepted on or after 5 November 2022
- Works paid between 1 January 2023 and 31 December 2027 (deadline extended by Finance Act 2026)
- The property must move from an E, F or G energy rating to A, B, C or D on the DPE energy certificate
- Works must be carried out by certified professionals
Eligible works (and those that are not)
✅ Deductible works
- • Maintenance and repairs: painting, plumbing, roofing, boiler replacement, electrical upgrades
- • Improvement: thermal insulation, ventilation, bathroom renovation, external rendering
- • Ancillary costs related to works (architect fees, project management)
❌ Excluded works
- • Construction: new buildings
- • Reconstruction: demolition and rebuild
- • Extension: creation of new habitable floor space
- • Works carried out by the owner themselves (self-build)
The 3-year rule: mandatory letting commitment
This is the most common pitfall of the déficit foncier.
When you offset a déficit foncier against your global income, you must keep the property let as a bare rental until 31 December of the 3rd year following that offset.
Example: deficit offset in 2026 → the property must remain let until at least 31 December 2029.
If you sell, cease letting, or convert the property to a furnished rental before that deadline, the tax authority claws back the benefit: the offset is cancelled and you must repay the tax saved, plus penalties and late-payment interest.
What does not invalidate the rule:
- Involuntary and limited vacancy (between two tenants)
- Death of the owner
- Disability or redundancy
Full worked example: energy renovation of a 2-bed flat rated F
Data
- Property purchased for €120,000 (DPE energy rating: F)
- Annual rents: €7,200 (€600/month)
- Mortgage interest: €2,400
- Energy-renovation works (insulation + heat pump): €28,000
- Property tax (taxe foncière): €800 · Service charges (charges de copropriété): €400 · Insurance: €150
Deficit calculation
| Item | Amount |
|---|---|
| Gross rents | + €7,200 |
| − Mortgage interest | − €2,400 |
| Intermediate result | + €4,800 |
| − Works | − €28,000 |
| − Property tax (taxe foncière) | − €800 |
| − Service charges | − €400 |
| − Insurance | − €150 |
| Total déficit foncier | − €24,550 |
Offset (enhanced cap of €21,400 applies as works qualify for DPE F→C improvement)
- Offsettable against global income: €21,400
- Carry-forward against future rental income: €3,150 (over 10 years)
Income tax (IR) saving
- Marginal rate (TMI) 30%: €21,400 × 30% = €6,420 income tax saved
- Marginal rate (TMI) 41%: €21,400 × 41% = €8,774 income tax saved
Déficit foncier in an SCI IR
The déficit foncier applies in exactly the same way within an SCI (Société Civile Immobilière — French property holding company) taxed at income tax (IR), allocated pro rata to each partner’s share.
Example: SCI IR with two equal partners (50/50), déficit foncier of €18,000
- Each partner’s share: €9,000
- Each partner offsets €9,000 against their own global income (< €10,700)
The 3-year rule also applies to the SCI: the property must remain let by the SCI for 3 years following the offset.
Déficit foncier and the micro-foncier regime: beware the change of regime
If you are currently on the micro-foncier regime and have significant works to carry out, you can elect for the actual-expenses regime for the year of the works and generate a déficit foncier. This election is binding for a minimum of 3 years (irrevocable).
Common strategy: elect for the actual-expenses regime in the year of major works to generate the maximum déficit foncier, then remain under that regime if charges continue to exceed 30% of rents.
Déficit foncier vs other schemes
| Criterion | Déficit foncier | LMNP réel | Denormandie |
|---|---|---|---|
| Type of letting | Bare rental only | Furnished only | Bare rental only |
| Tax benefit | Deduction from global income | Depreciation (tax = 0) | Tax reduction |
| Annual cap | €10,700 (or €21,400) | No cap | €300,000 base |
| Letting commitment | 3 years | Free | 6–12 years |
| Works mandatory | No (but necessary) | No | Yes (25% of cost) |
| Applied against | Global income | BIC income only | Income tax |
FAQ
Can déficit foncier and Denormandie be combined?
Combining the two is heavily restricted. The same expenditure cannot benefit from two separate tax advantages: works included in the Denormandie tax-reduction base cannot simultaneously generate a déficit foncier. In practice, a Denormandie property generally does not produce a déficit foncier on the works that gave rise to the reduction. Consult a chartered accountant before pursuing any combination strategy.
Can the déficit foncier be carried forward from one year to the next?
The €10,700 cap is assessed independently each year. If your deficit is €25,000, you offset €10,700 in the first year and carry forward €14,300 against future rental income (over 10 years). You cannot 'spread' the cap across several years for the same deficit.
What happens if the property remains vacant during the 3-year rule period?
An involuntary and limited vacancy between two tenants does not invalidate the benefit. However, if you decide to stop letting (for works, personal use, or sale) within the 3-year window, the offset is reversed.
Does déficit foncier count against the tax-relief cap (plafonnement des niches fiscales)?
No. The déficit foncier is a deduction (not a tax reduction), so it falls outside the €10,000/year cap on tax reliefs. This is a significant advantage over schemes such as Denormandie.
Can works carried out before the property is let be deducted?
Yes, subject to conditions. The tax authority (BOFiP) allows the deduction if the owner can demonstrate that the property was always intended for letting and that the letting commences within a reasonable time. If the delay is too long or there is interim personal use, the administration may disallow the deduction. Consult a chartered accountant if in doubt.
In summary
- Standard cap: €10,700/year offsettable against global income
- Enhanced cap: €21,400/year for energy renovation (DPE E/F/G → D minimum, works paid before 31/12/2027)
- Mortgage interest: offsettable against rental income only (never against global income)
- Carry-forward: surplus carried forward against rental income over the following 10 years
- 3-year rule: the property must remain let as a bare rental until 31 Dec of the 3rd year following the offset
- Outside the tax-relief cap: this is a deduction, not a tax reduction — it does not count against the €10,000/year niches fiscales ceiling
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Potential deficit, income-tax saving by marginal rate, and actual-expenses vs micro-foncier comparison — calculated for your property.
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