The countdown has begun for the approximately 164,000 households whose real estate assets exceed 1.3 million euros. They will have to complete their Real Estate Wealth Tax (IFI) declaration no later than between May 23 and June 6, depending on the department of residence. Unlike the income tax return, pre-filled by the tax authorities and to be finalized on the same dates, that of the IFI is fully completed by the taxpayer. The exercise is more complex than it seems since it is necessary to evaluate your taxable assets, made up of your various real estate assets, deduct the related debts, then calculate the tax due.
Errors can be costly, particularly the lack of declaration. In the event of an audit, the tax administration makes an adjustment over the previous six years and applies penalties. “It may notice the absence of a declaration either during an unannounced inspection, or, most often, during the sale or transfer of a property,” notes Catherine Costa, head of the heritage engineering at Milleis Banque.
Undervaluing a good, a dangerous game
Likewise, undervaluing your assets to reduce your rating is a dangerous game. An apartment declared for 1 million euros to the IFI but sold for double that a few months later will inevitably raise questions from the Public Treasury, and a recovery, this time over the last three years. It is appropriate to assess all of your taxable assets at their market value on January 1, 2024, corresponding to the price at which the property could have been sold on that date. “This value must be updated each year according to the evolution of the market for each asset, both upwards and downwards,” explains Marie Damourette, wealth engineer at the Neuflize OBC bank. This year, taxpayers can take advantage of the decline in real estate prices in many regions to revise their figure compared to 2023. But beware of abuse: owners having not or very little revalued their properties in recent years while the prices of stone were soaring (+ 17.3% over ten years as of January 1, 2024, according to Meilleurs Agents) cannot reasonably depreciate them this year (- 7% in 2023). It would be difficult to plead good faith in the event of an audit.
To estimate their property, the taxpayer can use the Patrim site, of the tax service, or Immo Data, which lists recent sales around a given address. It is better to keep your sources in order to be able to justify your assessment in the event of a tax audit. The main residence benefits from a 30% reduction: the taxpayer therefore only enters 70% of its value in his declaration. “Please note, it is not possible to apply it if the main residence is held via a company,” explains Marie Damourette.
Discount in case of rental
Rented properties can justify a discount of around 10% to 20% depending on the conditions of occupancy: they are not as liquid as a vacant property. “This is not a legal provision but a tolerance from the tax administration, which must be able to be justified, for example with a lease,” points out Christine Valence, wealth engineer at BNP Paribas Wealth Management. Paper property (SCPI, OPCI) is also taxable, but not professional real estate, which is exempt from IFI.
It then remains to take into account the debts to be put as liabilities, which will be deducted from the assets to calculate the net taxable wealth. These are debts relating to real estate subject to the IFI, as well as property taxes. “Anti-abuse measures have been provided for by the legislator, warns Christine Valence. The most recent concerns the rules for valuing shares in companies subject to the IFI. It is now no longer possible to take into account, in this valuation , debts relating to non-taxable assets, such as professional real estate.”
Please note that cohabiting partners living under the same roof are required to make a joint IFI declaration, even if they are subject to separate income tax.