❓ Question from Leo, submitted on January 2, 2025:
“I bought a property in September 2021 for €100,000 and am selling it in 2025 for €350,000. How much do I need to reinvest to avoid paying capital gains tax?”
💼 What is capital gains tax and how is it applied?
Capital gains tax is the difference between the purchase price and the sale price of a property. Under the French Tax Code (CGI), income from the sale of real estate is subject to income tax and social contributions. This applies to the sale of secondary residences or investment properties.
However, the sale of a primary residence (résidence principale) is fully exempt from capital gains tax. This exemption also covers dependent properties, such as garages, cellars, or parking spaces.
🏠 Exemptions under Article 150 U of the CGI
Article 150 U of the Tax Code outlines specific cases where real estate sales are exempt from tax:
• Sale of a secondary residence.
• Sale of investment property.
• Sale after a specific holding period.
🔄 Reinvesting to avoid taxation
If you plan to reinvest the proceeds from the sale in a new property, you may qualify for tax exemption. However, this is only possible under certain conditions described in Article 150 U, II, 1 bis of the CGI.
✅ Key conditions:
1. This must be your first sale of property that is not a primary residence.
2. You must not have owned a primary residence in the past four years.
3. You must purchase or build a new property that will become your primary residence within 24 months of the sale.
📈 Example Calculation
If you sell your property for €350,000 but reinvest only €250,000, this represents 71% of the sale price. Accordingly, you will be exempt from 71% of the capital gains tax.
Capital gain in this case:
€350,000 − €100,000 = €250,000.
Taxable amount:
• 29% of the capital gain = €72,500.
• Income tax = 19%.
• Social contributions = 17.2%.
• Additional tax (if the gain exceeds €50,000).
Total tax liability: €27,550 + additional tax.
💸 Additional tax on large capital gains
Since January 1, 2013, an additional tax applies if the capital gain exceeds €50,000.
To avoid capital gains tax entirely, you must reinvest the full sale proceeds into purchasing a new property that meets the above conditions.
📞 Contact us if you’re planning to buy or sell property. We’ll guide you every step of the way!
“I bought a property in September 2021 for €100,000 and am selling it in 2025 for €350,000. How much do I need to reinvest to avoid paying capital gains tax?”
💼 What is capital gains tax and how is it applied?
Capital gains tax is the difference between the purchase price and the sale price of a property. Under the French Tax Code (CGI), income from the sale of real estate is subject to income tax and social contributions. This applies to the sale of secondary residences or investment properties.
However, the sale of a primary residence (résidence principale) is fully exempt from capital gains tax. This exemption also covers dependent properties, such as garages, cellars, or parking spaces.
🏠 Exemptions under Article 150 U of the CGI
Article 150 U of the Tax Code outlines specific cases where real estate sales are exempt from tax:
• Sale of a secondary residence.
• Sale of investment property.
• Sale after a specific holding period.
🔄 Reinvesting to avoid taxation
If you plan to reinvest the proceeds from the sale in a new property, you may qualify for tax exemption. However, this is only possible under certain conditions described in Article 150 U, II, 1 bis of the CGI.
✅ Key conditions:
1. This must be your first sale of property that is not a primary residence.
2. You must not have owned a primary residence in the past four years.
3. You must purchase or build a new property that will become your primary residence within 24 months of the sale.
📈 Example Calculation
If you sell your property for €350,000 but reinvest only €250,000, this represents 71% of the sale price. Accordingly, you will be exempt from 71% of the capital gains tax.
Capital gain in this case:
€350,000 − €100,000 = €250,000.
Taxable amount:
• 29% of the capital gain = €72,500.
• Income tax = 19%.
• Social contributions = 17.2%.
• Additional tax (if the gain exceeds €50,000).
Total tax liability: €27,550 + additional tax.
💸 Additional tax on large capital gains
Since January 1, 2013, an additional tax applies if the capital gain exceeds €50,000.
To avoid capital gains tax entirely, you must reinvest the full sale proceeds into purchasing a new property that meets the above conditions.
📞 Contact us if you’re planning to buy or sell property. We’ll guide you every step of the way!