The actual expense regime (régime réel) under French LMNP (non-professional furnished rental) status is the most powerful tax optimisation tool available to furnished property landlords, allowing full deduction of real costs rather than a flat-rate allowance. Mandatory above €77,700 in annual rental income and available on request below that threshold, it covers a broad range of deductible expenses: mortgage interest and financing costs, agency and accounting fees, insurance premiums (PNO, GLI), co-ownership charges, maintenance and repair works, property tax, and acquisition costs. On top of these, depreciation — applied to the property itself, furniture, and improvement works — can reduce taxable income to zero for many years without any cash outflow. Every deducted expense must be supported by documentary evidence and directly tied to the rental activity. As of 2026, the LMNP actual expense regime remains entirely unchanged and continues to outperform the new 'private landlord' status introduced by the 2026 Finance Bill, which targets unfurnished letting under strict conditions only. One key strategic consideration: depreciation previously claimed is reintegrated into the taxable capital gain calculation upon resale, making early planning essential.
Are you renting out a furnished apartment and looking to reduce your tax liability legally and to the fullest extent? The actual expense regime (régime réel) under LMNP (non-professional furnished rental) is undoubtedly the most powerful tax tool at your disposal provided you know exactly which deductible expenses you can include in your tax return. Because between what the law allows, what landlords overlook, and what the tax authorities reject, the gap can be considerable.
This comprehensive guide takes stock, for 2025-2026, of the exhaustive list of deductible expenses under the LMNP actual expense regime, their eligibility conditions, the boundary with depreciation, the supporting documents required, and the declaration errors to avoid.
The status of Non-Professional Furnished Landlord (LMNP) applies to any property owner who rents out a furnished dwelling without this activity constituting their main profession. From a tax perspective, income from furnished rentals is classified under the category of Industrial and Commercial Profits (BIC), and not as property income.
There are two tax regimes available to LMNP landlords:
The actual expense regime is mandatory as soon as your annual furnished rental income exceeds €77,700 (2025-2026 threshold). Below this ceiling, you can opt into it, and it is often highly advantageous from a tax perspective.
💡 If you are still unsure which regime to choose, our article Which tax regime to choose to declare your rental income? will help you decide based on your actual situation.
This is the heart of the matter. Here is the full list of expenses you can legally deduct from your rental income under the actual expense regime.
The interest on your mortgage taken out to acquire the rented property is fully deductible for the year in which it is paid. This includes:
Condition: the loan must have been taken out for the acquisition, construction or improvement of the furnished rental property.
Practical example: you are repaying a mortgage with annual interest of €4,800, plus €900 in borrower insurance. You can deduct €5,700 from your rental income.
All costs related to the management of your furnished property are deductible:
Insurance premiums directly linked to your rental activity are deductible:
Please note: borrower insurance is classified under financing costs (see above). Personal insurance taken out by the owner and unrelated to the rented property is not deductible.
In furnished rentals, almost all co-ownership charges are deductible under the actual expense regime:
Only exceptions: charges re-invoiced to and recoverable from the tenant are not deductible, as they do not represent a definitive cost for the owner. On this subject, consult our detailed article on recoverable charges in furnished rentals to clearly distinguish what falls to you and what falls to the tenant.
Expenditure on works is often the most strategic deduction item. Under the LMNP actual expense regime, maintenance and repair works are immediately deductible as expenses for the financial year:
On the other hand, improvement or construction works that increase the value or floor area of the property are generally not deductible as expenses. They may, however, be depreciated over several years (see the dedicated section below).
The boundary between maintenance works (deductible) and improvement works (depreciable) can be subtle. Our comprehensive guide on deductible vs non-deductible renovation costs in LMNP will help you categorise each expense accurately.
The property tax (taxe foncière) relating to the rented property is fully deductible. This also includes the tax on built properties (TFPB) and, where applicable, the special equipment tax.
Caution: the taxe d'habitation (if exceptionally charged to you) and the Cotisation Foncière des Entreprises (CFE) have different treatment the CFE is deductible as an expense, but requires specific accounting treatment.
During your first financial year under the actual expense regime, you may deduct or depreciate the acquisition costs of the property:
These costs may, at your discretion, be deducted in full in the year of acquisition or depreciated over several years. Your accountant will advise you on the most advantageous option for your situation.
Other costs, often overlooked, are also deductible:
This is one of the most frequently asked questions and one of the most common sources of confusion. Here is the fundamental distinction:
A deductible expense is a cost you can charge in full to the current financial year, thereby directly reducing your BIC taxable result for the year. These are generally recurring or low-value expenditures that do not permanently increase the value of the property.
Examples: loan interest, insurance, management fees, property tax, minor repairs.
Depreciation is the accounting recognition of the gradual loss in value of an asset over time. Under the LMNP actual expense regime, you may depreciate:
Depreciation is one of the great advantages of the actual expense regime: it allows you to deduct a fraction of the property's purchase price each year, often without any cash outflow, which can generate a tax deficit or bring taxable income down to zero for many years.
Key rule: depreciation cannot create a deficit that can be offset against overall income. It is carried forward indefinitely to future profitable financial years.
| Criterion | Deductible expense | Depreciation |
|---|---|---|
| Deduction | Immediate (1 year) | Spread over time (5 to 40 years) |
| Type of expenditure | Recurring, routine | Investment, lasting improvement |
| Impact on deficit | May generate a carry-forward deficit | Cannot generate a deficit |
| Examples | Interest, insurance, management fees | Property, furniture, improvement works |
Not all expenditure is automatically deductible. Three cumulative conditions must be met:
The expenditure must have a direct and exclusive link with your furnished rental activity. A mixed-use expense (private and rental) must be apportioned proportionally.
Under BIC accounting, expenses are deducted for the year to which they relate, regardless of the date of payment. This is accruals-basis accounting, as opposed to cash-basis accounting.
This is an absolute requirement: each deducted expense must be justified by an accounting document (invoice, receipt, bank statement, notarial deed…). In the event of a tax audit, the authorities may request these documents for up to 3 years (or 6 years in cases of suspected fraud).
Supporting documents to retain for each category of expense:
Certain expenditures are excluded from tax deduction under the LMNP actual expense regime. Confusing them with deductible expenses is a classic mistake that can lead to a tax reassessment:
Under the simplified actual expense regime, LMNP declarations are made via:
Membership of a CGA offers a dual advantage: it allows you to avoid a 25% surcharge on your taxable result (abolished since 2023, but the CGA remains useful for account certification) and entitles you to a tax reduction on accounting fees.
For most LMNP landlords under the actual expense regime, the support of an accountant is strongly recommended, if not essential. The BIC tax return is complex, depreciation rules even more so, and a declaration error can be costly. Accounting fees are, moreover, themselves deductible!
For everything you need to know about the practical steps, our article Furnished rentals: how to declare your rental income? walks you through the LMNP declaration process step by step.
The 2026 Finance Bill (PLF 2026) comes in a context of significant tension in the rental property market and introduces several important changes that every LMNP landlord should be aware of.
The major innovation of the PLF 2026 is the creation of a private landlord status, aimed at owners who let properties unfurnished (bare rental) under strict conditions: rents capped below market rates (intermediate, social or very social rents), property rated DPE A or B, and a minimum rental commitment of 9 years. This status opens the right to a tax depreciation mechanism for bare rentals, calculated on 80% of the property's value, capped at between €8,000 and €12,000 per year depending on the level of rent charged.
This status does not replace LMNP. It targets primarily investment in new-build properties or highly regulated schemes, and is more a housing policy instrument than a tax optimisation strategy comparable to LMNP under the actual expense regime.
Good news: the LMNP actual expense regime remains unchanged in 2026. It retains all its advantages deduction of expenses, depreciation of the property and furniture, long-term tax optimisation. For rental investment in existing properties, long-term furnished letting under LMNP status remains, in 2026, the most profitable and sustainable option.
Micro-BIC thresholds also remain stable: a 50% allowance for a ceiling of €77,700 for standard furnished rentals.
A notable change concerns non-resident landlords: from 2026, worldwide income is now taken into account when determining whether a landlord falls under LMNP or LMP (Professional Furnished Landlord) status. In practice, many non-residents who previously fell under LMP status will now shift to LMNP status, which modifies the applicable tax rules, particularly on capital gains at resale: loss of the exemptions specific to professional landlords, but long exemption periods (22 years for income tax, 30 years for social levies) with progressive allowances.
An important reminder from recent reforms (2025-2026): when selling your LMNP property, the depreciation deducted over the years is reintegrated into the calculation of the taxable capital gain. The capital gain remains subject to the private individuals' capital gains regime with the usual allowances for length of ownership. This is a parameter to factor into your wealth strategy from the moment you enter the actual expense regime.
For a comprehensive analysis of all these developments and their practical impact on your investment, consult our guide LMNP 2026: tax rules, income reporting and French Finance Act changes.
The LMNP actual expense regime is a remarkably effective tax tool, but it requires rigour and a thorough understanding of the applicable rules. The list of deductible expenses is long loan interest, management fees, insurance, co-ownership charges, property tax, works and these are supplemented by depreciation, which often allows taxable income to be reduced to zero for many years.
The key to success: precise accounting, meticulously kept supporting documents, and in the majority of cases, the use of an accountant specialising in furnished rentals. The cost of this support is, moreover, itself deductible!
In 2025-2026, the recent tax developments reinforce the importance of rigorous monitoring, particularly regarding the treatment of depreciation on resale. Stay informed of regulatory developments to sustainably optimise your rental investment.
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