You have spent €30,000 on works in an unfurnished rental flat and your rental income is not enough to absorb them: the portion of charges that exceeds your rents can be used to wipe out a fraction of your taxable salary, up to a limit of €10,700 per year. And if those works lift your property out of thermal-sieve status, this cap is doubled to €21,400. The property income deficit (déficit foncier) is one of the few tax levers that rewards renovation while reducing tax on your overall income — provided you know the exact rules.
The topic is all the more strategic in 2026 as the "energy renovation" bonus is only open until 31 December 2027 and dovetails directly with the timetable banning the letting of F- and G-rated properties. But you must get the figure right: the doubled cap is €21,400, not €40,000 as is sometimes claimed. Here is how the mechanism works, what it actually saves you and the pitfalls that cancel the benefit.
Cap on imputation against overall income: €10,700/year, doubled to €21,400 for energy renovation (CGI article 156) — the surplus remains carried forward against rental income for the following 10 years.
What this article covers
This article details the property income deficit mechanism under the actual-expenses regime (régime réel): which charges are deductible, the €10,700 cap against overall income, the €21,400 bonus reserved for energy renovation of a thermal sieve, the treatment of the surplus (10-year carry-forward against rental income, 6 years against overall income), a full worked example, the mistakes that forfeit the benefit and how to combine this lever with exiting the F and G classes.
The legal framework of the property income deficit: CGI article 156 and the renovation bonus
The property income deficit (déficit foncier) is a mechanism set out in article 156 of the French General Tax Code (CGI). It applies to owners who let a property unfurnished and who have opted for the actual-expenses regime (régime réel) for taxing rental income — as opposed to the micro-foncier regime, which applies a flat 30% allowance and permits no deduction of actual charges. The actual-expenses regime is compulsory above €15,000 of gross annual rental income and available by election below that threshold.
The principle: when the deductible charges of an unfurnished rental property exceed the rental income for the year, the property income result becomes negative. This deficit is imputed first against the household's other positive rental income. If a deficit remains after this imputation, the fraction that does not arise from loan interest is imputed against overall income (salaries, pensions, business profits, etc.) up to an annual limit of €10,700 (CGI article 156, I-3°). It is this imputation against overall income that gives the scheme all its value: it reduces the income tax base, and therefore the tax itself.
The amending finance act for 2022 (Act no. 2022-1499 of 1 December 2022, article 12) introduced a doubled cap, raised to €21,400, for taxpayers carrying out energy renovation works that allow a property to move from energy class E, F or G (the "DPE" — Diagnostic de Performance Énergétique, France's energy performance certificate) up to at least class D. Decree no. 2023-297 of 21 April 2023 specified the conditions of application: the expenditure must be paid between 1 January 2023 and 31 December 2027, and the change of class must be evidenced by two DPEs (before and after the works).
| Item | Rule | Legal reference |
|---|---|---|
| Standard cap against overall income | €10,700/year | CGI article 156, I-3° |
| Doubled "energy renovation" cap | €21,400/year | Act no. 2022-1499 of 1 Dec. 2022, article 12 |
| Class condition | Move from E, F or G up to at least D | Decree no. 2023-297 of 21 April 2023 |
| Bonus application period | Expenditure paid from 1 Jan. 2023 to 31 Dec. 2027 | Act no. 2022-1499, article 12 |
Note: the €21,400 cap is not a combination of the standard cap plus a €10,700 bonus added to some other amount. It is a single, doubled cap, applicable in the year the renovation condition is met. The "€40,000" figure that sometimes circulates is false: no legal text sets the property income deficit imputation cap at that level.
How the property income deficit mechanism works
The calculation runs through several stages. Understanding the order of imputation is essential, as it determines which portion of the deficit actually reduces your tax and which portion is merely carried forward.
Stage 1 — Distinguish "non-interest" charges from loan interest
Not all deductible charges are treated the same way. Loan interest (and associated borrowing costs) is imputed only against rental income: it can never create a deficit imputable against overall income. Conversely, the other charges — maintenance, repair and improvement works, property tax, insurance premiums, management fees, deductible co-ownership provisions — can generate a deficit imputable against overall income. The deficit imputable against overall income is therefore capped at the fraction of the deficit arising from these "non-interest" charges.
Profile: landlord under the actual-expenses regime owning an F-rated flat, financing insulation and heating works with a loan — a situation where loan interest and works charges each play their own distinct tax part.
Stage 2 — Impute the deficit in the right order
The overall property income deficit for the year is imputed first against any positive rental income from the household's other properties. The remaining negative balance, up to the "non-interest" fraction, is then imputed against overall income up to the annual limit of €10,700 (or €21,400 in the case of eligible energy renovation). The portion exceeding that cap, together with the portion arising from loan interest, switches to carry-forward.
Stage 3 — Carry forward the surplus
The carry-forward rule distinguishes two compartments. The fraction of deficit not imputed because it exceeds the overall-income cap is carried forward against overall income for the following 6 years. The fraction of deficit arising from loan interest, together with the property income deficit that could not be imputed for lack of rental income, is carried forward exclusively against rental income for the following 10 years (CGI article 156, I-3°). These carry-forwards are valuable: they allow a large works operation to be amortised for tax purposes over several financial years.
| Type of deficit / surplus | Imputed against | Carry-forward period |
|---|---|---|
| Non-interest deficit, within the cap | Overall income | Immediate imputation |
| Fraction exceeding the cap (€10,700 / €21,400) | Overall income | 6 years |
| Deficit arising from loan interest | Rental income only | 10 years |
| Deficit not imputed for lack of rental income | Rental income only | 10 years |
Stage 4 — Honour the letting commitment
The benefit is only definitively secured if the property remains let unfurnished until 31 December of the third year following the year in which the deficit was imputed against overall income. If you cease letting (sale, repossession for personal use, switch to furnished letting) before that point, the tax authorities may challenge the imputation and recalculate your tax without taking the deficit into account. This commitment condition applies both to the €10,700 cap and to the €21,400 bonus.
Case study: an F-rated flat renovated to reach class D
To make the mechanism concrete, take a worked example — the amounts are indicative and based on market orders of magnitude; they do not replace a personalised simulation. You own a 58 m² flat in a mid-sized town, let unfurnished, rated F on the DPE. In 2026 you undertake an energy renovation (internal wall insulation, replacement of joinery, installation of a heat pump) for €34,000 of deductible works, financed partly by a loan generating €2,800 of interest during the year. A post-works DPE certifies the move to class D.
Scenario — Property income deficit of an energy renovation eligible for the doubled cap (gross rental income €7,200, other current charges €1,900)
| Item | Detail | Amount |
|---|---|---|
| Gross rental income (rents) | €600/month × 12 | €7,200 |
| Non-interest charges | Works €34,000 + current charges €1,900 | −€35,900 |
| Loan interest | Imputable against rental income only | −€2,800 |
| Property income result for the year | 7,200 − 35,900 − 2,800 | −€31,500 |
| Deficit imputable against overall income (renovation bonus) | Doubled cap €21,400 | €21,400 |
| Estimated tax saving (imputation against overall income, 30% marginal rate) | €21,400 × 30% | ≈ €6,420 |
Reading the result: imputation against overall income reduces income tax at your marginal income tax rate (the TMI, taux marginal d'imposition, marginal income tax rate), but not the social charges — those (17.2%) apply only to positive rental income, not to salary. For this profile at a 30% marginal rate, imputing €21,400 against overall income is therefore worth about €6,420 of tax saving in the first year (and more at a 41% or 45% marginal rate). The remaining deficit, i.e. €10,100 (€31,500 − €21,400), is not lost: the portion arising from loan interest is carried forward against rental income for the following 10 years, and the non-interest portion exceeding the cap is carried forward against overall income for the following 6 years. As your rents return to positive, these carry-forwards wipe out both tax and social charges.
The mistakes that forfeit the property income deficit benefit
Mistake no. 1 — Believing the bonus cap is €40,000
The doubled energy renovation cap is €21,400, not €40,000. This erroneous figure circulates on forums and some comparison sites. The consequence of believing it is concrete: you overestimate the year's tax saving and mistime your works. The right reflex is to reason on a maximum of €21,400 imputable against overall income, with the rest going into carry-forward.
Mistake no. 2 — Confusing deductible and non-deductible works
Only maintenance, repair and improvement works are deductible from rental income. Construction, reconstruction or extension works are not: they increase the value of the property and fall under capital gains, not the property income deficit. Wrongly including extension works in your deficit exposes you to a reassessment. If in doubt about the classification, have the nature of the works validated by a professional.
Mistake no. 3 — Forgetting the 3-year letting commitment
Selling, repossessing the property to live in it or switching it to furnished letting before 31 December of the 3rd year following the imputation triggers the challenge of the deficit imputed against overall income. This mistake is common among landlords who renovate then quickly resell to realise a capital gain. If a quick resale is contemplated, the trade-off between the property income deficit and a disposal strategy must be settled upstream.
⚠️ Warning: the €21,400 bonus requires a change of class documented by two DPEs (before and after the works) proving the exit from at least class E, F or G up to at least class D. Without this evidence, only the standard €10,700 cap applies. Keep both diagnostics and the contractors' invoices.
Mistake no. 4 — Staying on micro-foncier when the works justify the actual-expenses regime
The property income deficit only exists under the actual-expenses regime. If you are on micro-foncier (flat 30% allowance) and you undertake heavy works, you cannot deduct them: the allowance is deemed to cover all your charges. The election for the actual-expenses regime is irrevocable for three years, but it is often a clear winner once actual charges exceed 30% of rents — which is almost always the case in a year of heavy renovation.
Estimate your property income deficit and your tax saving
Mon Simulateur Immobilier property income deficit simulator
Enter your rents, your charges, the cost of your works and your tax bracket: the simulator calculates your property income result, the portion imputable against overall income (€10,700 cap or €21,400 bonus if energy renovation is eligible), the year's tax saving and the amount carried forward to subsequent years.
To go further: the rental yield simulator to measure the impact of works on your net return, and the real estate capital gains calculator if a resale is contemplated.
Conclusion
The property income deficit remains one of the most effective tax schemes for a landlord under the actual-expenses regime: it turns a works expense into a direct reduction of tax on overall income, up to €10,700 per year — a cap doubled to €21,400 when the renovation lifts the property out of thermal-sieve status. This bonus, open until 31 December 2027, takes on its full meaning against the timetable banning the letting of F-rated (2028) and G-rated (already in force) properties: renovating becomes both a market obligation and a tax opportunity.
Before launching your works, cost the operation precisely: the Mon Simulateur Immobilier property income deficit simulator calculates your tax saving, the imputable portion and the carry-forward surplus based on your situation, to decide on the right timing of expenditure and the right tax regime.
