The Denormandie investment scheme offers a tax reduction for the purchase of an old property with work carried out, which is then rented out. Here are the conditions you need to know in order to benefit.
This scheme, which bears the name of former minister Julien Denormandie, offers tax breaks to landlords who carry out major renovation work on older properties with a view to letting them out. To qualify, a number of criteria must be met: in particular, the property must be let empty, and the rent and income of the tenants must not exceed the regulatory ceilings in force.
Eligible areas
When the scheme was introduced in 2019, only 250 towns were eligible. There are now 1,700. The property must be located in one of these areas:
- A town with the ‘Action cœur de ville’ label.
- A town with a particularly high need for housing regeneration.
- A town that has signed an agreement for a regional regeneration operation (ORT).
It is advisable to target towns with strong rental demand, and to opt for properties close to the centre or close to services and public transport.
The work to be carried out
The work to be carried out on the property, which is defined by an order and decree dated 26 March 2019, is quite extensive: it must represent at least 25% of the total cost of the investment.
They must also improve energy performance by at least 30% and involve at least two major renovations (walls, roofs, windows, boiler, etc.) or the creation of new living space.
Tax relief
The tax reduction is 12%, 18% or 21% of the total cost of the property, depending on the length of the rental commitment chosen (6, 9 or 12 years respectively). However, the tax reduction is capped at a maximum investment of €300,000 and a price per m² of €5,500. The Denormandie scheme is therefore a good way of combining investment, tax and yield.
Choosing the right size of property
Choosing the surface area of the property is not a trivial matter either. The ‘ceiling rent’ is calculated using an optimised multiplier for properties of less than 60 m². That's why it's advisable to give preference to 2- and 3-room properties.
Can be combined
The Denormandie Law can be combined with the deficit foncier mechanism (when property costs are higher than the rent received), but only under certain conditions. Only the part of the expenditure on works that exceeds the 25% threshold for compulsory works can be combined with the scheme. The property deficit can then be deducted from your overall income (up to a limit of €10,700 per year, or €21,400 for energy-saving works). That's enough to boost your profitability by a few more points.
Translated with DeepL.com (free version)
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