👩💼 A Real-Life Example
Josiane, a homeowner in Brest, successfully sold her property, making a capital gain of €22,000. However, there’s a catch: the difference between the selling price and the purchase price is subject to a 36.20% tax, which includes 19% income tax and 17.20% social tax.
“Except for primary residences, when selling a property you have owned for less than 30 years, you are required to pay capital gains tax.”
But Josiane had an idea to reduce her tax burden: “Can I add renovation costs to the purchase price?” she wondered.
🔨 Work Done by the Owner or a Contractor?
It’s a good idea: “The point is to increase the purchase price through renovation expenses, thereby reducing the difference with the selling price.” However, Josiane and her family carried out the renovations themselves, without hiring a construction company.
📜 According to Article 150 VB, Chapter II, Section 4 of the French Tax Code, renovation costs can only be considered if there are invoices from professional contractors.
Additionally, if Josiane had hired a contractor but purchased the materials herself, she could have only included labor costs—not material costs.
📊 What If There Were No Renovations?
As an alternative, Josiane can increase the purchase price by 15% if she has owned the property for more than five years. For example, if she bought the house for €200,000 eight years ago, she can add 15% of €200,000 (€30,000) to the purchase price.
However, this is less than the actual cost of major renovations carried out by a contractor, which could have increased the base value by €80,000.
💬 Have real estate questions? Contact me.
Josiane, a homeowner in Brest, successfully sold her property, making a capital gain of €22,000. However, there’s a catch: the difference between the selling price and the purchase price is subject to a 36.20% tax, which includes 19% income tax and 17.20% social tax.
“Except for primary residences, when selling a property you have owned for less than 30 years, you are required to pay capital gains tax.”
But Josiane had an idea to reduce her tax burden: “Can I add renovation costs to the purchase price?” she wondered.
🔨 Work Done by the Owner or a Contractor?
It’s a good idea: “The point is to increase the purchase price through renovation expenses, thereby reducing the difference with the selling price.” However, Josiane and her family carried out the renovations themselves, without hiring a construction company.
📜 According to Article 150 VB, Chapter II, Section 4 of the French Tax Code, renovation costs can only be considered if there are invoices from professional contractors.
Additionally, if Josiane had hired a contractor but purchased the materials herself, she could have only included labor costs—not material costs.
📊 What If There Were No Renovations?
As an alternative, Josiane can increase the purchase price by 15% if she has owned the property for more than five years. For example, if she bought the house for €200,000 eight years ago, she can add 15% of €200,000 (€30,000) to the purchase price.
However, this is less than the actual cost of major renovations carried out by a contractor, which could have increased the base value by €80,000.
💬 Have real estate questions? Contact me.