LMNP and Tourist Furnished Rentals: Tax Rules Tighten with the 2026 Finance Act (France)

Law No. 2026-103 of February 19, 2026, the 2026 Finance Act, was published in the Official Journal on February 20, 2026. For landlords renting out furnished accommodation on a non-professional basis, and particularly those operating tourist furnished rentals, the text marks a turning point. The flat-rate allowance under the micro-BIC regime is being reduced, and, most importantly, depreciation deducted during the rental period now increases the taxable capital gain upon resale. In other words: what you saved in taxes over the years can catch up with you when you sell. So it is worth understanding the rules before signing anything.

The Answer in 30 Seconds

The 2026 Finance Act tightens the tax rules for tourist furnished rentals under the LMNP regime on two fronts. First, the flat-rate allowance under the micro-BIC regime drops from 50% to 30% for classified tourist furnished rentals, with the revenue threshold lowered to €15,000. For unclassified tourist furnished rentals, the allowance falls to 21%, also with a €15,000 threshold. Second, and this is the most painful point, depreciation you deducted under the actual (real) regime is now added back into the calculation of the capital gain when you sell the property. In practice, selling a furnished rental after several years of depreciation can result in a significantly higher tax bill than before. If you are affected, check your situation before any sale or restructuring decision.

Wondering whether your lease or current structure remains relevant after this reform? Start by analyzing your contract and situation on bail.immo.

What the Law Says

The 2026 Finance Act amends several articles of the General Tax Code. ANIL provides a detailed analysis in its legal analysis dedicated to the 2026 Finance Act. The measures that directly concern non-professional furnished rental landlords are as follows.

Micro-BIC Allowance: The Cut

The micro-BIC regime allows furnished rental landlords whose annual revenue does not exceed a certain threshold to benefit from a flat-rate allowance representing expenses, instead of deducting their actual expenses. Until now, for classified tourist furnished rentals, the allowance was 71% within the limit of €188,700 in revenue. For unclassified tourist furnished rentals, it was 50% within the limit of €77,700.

The 2026 Finance Act reduces these benefits. The allowance for classified tourist furnished rentals drops to 30%, with a revenue threshold of €15,000. For unclassified tourist furnished rentals, the allowance falls to 21%, still with a €15,000 threshold. Above these thresholds, the actual (real) regime becomes mandatory. For a landlord renting out a classified tourist furnished rental with €40,000 in annual revenue, the change is drastic: they switch to the actual regime, with the obligation to keep accounts and deduct actual expenses, without being able to benefit from the flat-rate allowance.

Capital Gains: Recapture of Depreciation

This is the most significant measure. Under the actual regime, a non-professional furnished rental landlord can deduct depreciation on the property and furnishings each year. This depreciation reduces taxable income, and therefore the tax paid during the rental period. But at the time of sale, the capital gain was previously calculated without taking this depreciation into account. The 2026 Finance Act changes this: depreciation deducted is now added back into the calculation of the taxable capital gain.

Let us take a simple example. You buy an apartment for €200,000 to rent it out furnished. Over ten years, you deduct €50,000 in depreciation. You sell the property for €250,000. Before the reform, the gross capital gain was €50,000 (€250,000 – €200,000). After the reform, the taxable capital gain includes the €50,000 in recaptured depreciation, which can bring the taxable base to €100,000, before applying allowances for holding period. The tax bill can therefore double, or even more depending on your marginal tax bracket and holding period.

Other Measures to Watch

The 2026 Finance Act also includes measures on real estate capital gains, notably the extension of certain exemptions and allowances until December 31, 2027. These provisions concern specific cases: sales to social housing organizations, operations in major urban development projects, or territorial revitalization operations. If you are selling in this context, check the specific conditions. But for most tourist furnished rental landlords, it is indeed the reduced micro-BIC allowance and the recapture of depreciation that change the game.

Why This Can Be a Problem

The main trap is the time lag between the immediate tax advantage and the deferred penalty. For years, depreciation was sold as one of the great attractions of the LMNP under the actual regime: you reduce your tax on rental income, sometimes to zero, while building wealth. The recapture of depreciation in the capital gain turns this advantage into a latent tax liability. A landlord who optimized their annual tax without provisioning for the exit could end up with a taxable capital gain far exceeding the actual economic gain.

Another difficulty: the switch from micro-BIC to the actual regime. Many small tourist furnished rental landlords were under the micro-BIC regime with a comfortable allowance. With thresholds lowered to €15,000, a significant portion of them will switch to the actual regime. However, the actual regime requires accounting, maintaining a fixed asset register, and deducting actual expenses. For a landlord renting out a studio as a tourist furnished rental for a few weeks a year, the administrative complexity increases significantly, without the rental yield necessarily following suit.

Finally, there is a risk of reclassification. The boundary between tourist furnished rental and standard furnished rental is sometimes blurred. With differentiated allowances depending on the type of furnished rental, the tax authorities might be tempted to verify the actual nature of the activity. A furnished rental declared as a classified tourist furnished rental but that does not meet the classification conditions could be subject to the allowance for unclassified furnished rentals, or even a reassessment.

Concrete Example

Let us take the case of Claire, who owns an apartment in Annecy that she rents out as a classified tourist furnished rental. Her annual revenue is €30,000. Until 2025, she was under the micro-BIC regime with a 71% allowance, giving a taxable income of €8,700 (€30,000 × 29%). With the 2026 Finance Act, her revenue exceeds the €15,000 threshold: she switches to the actual regime. She must now deduct her actual expenses: loan interest, property tax, condominium fees, insurance, depreciation. If her actual expenses amount to €12,000, her taxable income rises to €18,000. The tax bill increases, even though depreciation is deductible.

Now imagine she sells the apartment in 2030. She bought it for €250,000 and deducted €60,000 in depreciation over five years. She sells it for €300,000. The economic capital gain is €50,000. But with the recapture of depreciation, the taxable base before allowances for holding period is €110,000. If she is taxed at 30% (19% income tax + 17.2% social contributions, with a partial allowance for holding period), the bill could exceed €30,000, whereas it would have been around €15,000 before the reform. The difference is massive.

Exceptions and Special Cases

Not all furnished rental landlords are in the same boat. The recapture of depreciation only concerns taxpayers who opted for the actual regime and actually deducted depreciation. If you remained under micro-BIC for the entire rental period, you did not deduct depreciation: the recapture does not apply to you. However, if you alternated between micro-BIC and the actual regime, only the depreciation deducted under the actual regime is recaptured.

Professional furnished rental landlords (LMP) are also affected by the recapture of depreciation, but their situation is different: they fall under professional capital gains, not individual capital gains. The rules for allowances and exemptions are not the same. If you are an LMP, the 2026 Finance Act includes specific measures, particularly regarding the inclusion of foreign income in assessing the €23,000 revenue threshold.

Standard furnished rentals, that is, furnished residential leases as a principal residence, are not affected by the reduction in the micro-BIC allowance. The allowance remains at 50% with a threshold of €77,700. The recapture of depreciation, however, applies to all furnished rentals under the actual regime, whether tourist furnished rentals or standard furnished rentals.

Finally, if you sell your principal residence, the capital gain remains exempt, even if you previously rented the property as furnished. But be careful: the exemption only applies if the property is your principal residence at the time of sale. If you rented it as a tourist furnished rental and then reoccupied it as your principal residence, the rental period can have consequences for the capital gain calculation, particularly through the recapture of depreciation.

Checklist: What You Need to Check

Identify your current tax regime: micro-BIC or actual (real) regime.
If you are under micro-BIC, check whether your annual revenue exceeds the new €15,000 thresholds for tourist furnished rentals.
If you switch to the actual regime, prepare your accounting: fixed asset register, depreciation tracking, and retention of invoices.
If you are under the actual regime, calculate the total amount of depreciation deducted since the start of the rental.
Before any sale, simulate the taxable capital gain including the recapture of depreciation.
Check whether you qualify for a specific exemption or allowance (principal residence, sale to a social housing organization, urban development operation).
If you rent out tourist furnished accommodation, ensure your classification is valid and that you meet the conditions to benefit from the corresponding allowance.
Consult a tax law professional if your situation is complex, especially if you have alternated between micro-BIC and the actual regime.

Possible Actions

If you are affected by the reform, several options are available. The first is to check your tax regime and anticipate any switch to the actual regime. If you were under micro-BIC and your revenue exceeds the new thresholds, you will need to keep accounts. Better to prepare now.

The second is to reassess your holding strategy. If you planned to sell a furnished rental in the medium term, the recapture of depreciation changes the calculation. In some cases, it may be more advantageous to hold the property longer to benefit from the holding period allowances, which reduce the taxable capital gain after five years of ownership. In other cases, selling before depreciation accumulates further may be preferable. It all depends on your personal situation.

The third is to check the compliance of your lease and structure. A poorly drafted lease, an abusive clause, or an error about the nature of the property can have indirect tax consequences. Before making a decision, analyze your contract on bail.immo.

Finally, if you plan to continue renting out tourist furnished accommodation, ask yourself about the real after-tax profitability. With a reduced allowance and heavier exit taxation, the net yield can be very different from what you anticipated. Sometimes, switching to a standard year-round furnished rental with a residential lease may be simpler and more tax-stable.

FAQ

Does the recapture of depreciation apply to sales already completed? No. The 2026 Finance Act applies to sales completed from its entry into force. Prior sales remain subject to the old rules.

I am under micro-BIC, am I affected by the recapture of depreciation? No, unless you were under the actual regime in the past and deducted depreciation. The recapture only concerns depreciation actually deducted under the actual regime.

Does the reduction in the micro-BIC allowance apply to standard furnished rentals? No. The 50% allowance with a €77,700 threshold remains applicable to standard furnished rentals as a principal residence. Only tourist furnished rentals see their allowance reduced.

Can I avoid the recapture of depreciation by selling to a relative? No. The recapture applies regardless of the buyer's status. Sales to relatives are also subject to specific rules, particularly regarding the sale price and tax audits.

Does the reform apply to unfurnished rentals? No. The recapture of depreciation only applies to furnished rentals. Unfurnished rentals fall under property income, with different rules.

Sources

Legal Information

The information presented on this page is provided for informational purposes and is based on the texts and sources available at the time of its publication or last update. Legislation, regulations, and case law may evolve at any time. The results and explanations provided by bail.immo do not constitute legal advice and do not replace the opinion of a lawyer or another competent legal professional.