How can you qualify for a capital gains tax exemption on the sale of real estate?
Taxes on real estate sales can be particularly high. Fortunately, in addition to the capital gains calculated on the sale of real estate, there are a number of tax exemptions. They were established by the legislature so as not to discourage buying and reselling in the real estate market.
Capital Gains Tax Exemption on the Sale of a Primary Residence
The best-known and most significant tax exemption applies to the sale of a primary residence, which is currently exempt from capital gains tax. Currently, you are not subject to capital gains tax on the profit realized from the sale of your primary residence (as well as any outbuildings, if sold at the same time), regardless of the amount of the profit or the length of time you owned the property. This exemption therefore applies to the majority of real estate sales.
What about in case of a move ? By definition, if you move out before the deed of sale is executed, the property is no longer your primary residence. You therefore risk losing your right to the tax exemption. Rest assured: the tax authorities allow for a reasonable period of time between the move and the actual sale of the home, provided that the property was your primary residence until it was put up for sale. If the delay exceeds one year, you should be prepared to provide justification, such as lengthy negotiation periods, specific characteristics of the home, or the state of the real estate market.
Other Cases of Capital Gains Tax Exemptions on Real Estate Sales
Other scenarios are taken into account for exemption from capital gains tax on real estate. There is an exemption on the first sale of a second home (This applies provided that you do not own your primary residence and have not owned one in the past 4 years. You must agree to reinvest the proceeds from the sale in the purchase of a primary residence within the next two years.)
Also note that if you have owned your property (other than your primary residence) for more than 5 years at the time of sale, you are eligible for a tax deduction that reduces the capital gains tax. This tax may even be waived entirely if you have owned the property for more than 30 years. This is theexemption based on the length of ownership of your property; your tax will therefore decrease over time.
Table of tax deductions by holding period:
Length of Detention
Cumulative deduction rate (Income Tax). Cumulative deduction rate (Social Security Contributions)
0 0 0,00%
1 0% 0,00%
2 0% 0,00%
3 0% 0,00%
4 0% 0,00%
5 0% 0,00%
6 6% 1,65%
7 12% 3,30%
8 18% 4,95%
9 24% 6,60%
10 30% 8,25%
11 36% 9,90%
12 42% 11,55%
13 48% 13,20%
14 54% 14,85%
15 60% 16,50%
16 66% 18,15%
17 72% 19,80%
18 78% 21,45%
19 84% 23,10%
20 90% 24,75%
21 96% 26,40%
22 100% 28,00%
23 100% 37,00%
24 100% 46,00%
25 100% 55,00%
26 100% 64,00%
27 100% 73,00%
28 100% 82,00%
29 100% 91,00%
30 100% 100,00%
The Sale of the former residence for retirees or people with disabilities also qualifies for the tax exemption on capital gains from real estate. To qualify, the property must be sold within two years of moving out and must not have been occupied in the meantime. This exemption is also subject to income requirements: the reference taxable income must not exceed €25,839 for the first full share, plus €6,037 for the first half-share, and then €4,572 for each additional half-share (2020 figures). Additionally, the taxpayer must not have been subject to the Real Estate Wealth Tax (formerly known as ISF in this context) in the year before last preceding the sale.
In fact, the retirees or people with disabilities may also be eligible for a capital gains tax exemption when they sell real estate that is not their primary residence. The income requirements are stricter in this case: the reference taxable income must be less than €10,988 for the first share, and €2,934 for each additional half-share (2020 figures). Again, the taxpayer must not have been subject to the IFI in the year before last preceding the sale.
There are also other situations in which capital gains on the sale of real estate are exempt, such as those resulting from eminent domain, or those involving sales prices under €15,000 (for example, in the case of basements and parking garages). Since the law on this subject changes regularly, it is important to check in advance to determine whether you are eligible for a tax exemption and under what conditions.
What happens if you move abroad and sell your primary residence?
If you move abroad (by transferring your tax residence outside France) and put your former primary residence in France up for sale, you can still take advantage of the capital gains tax exemption.
However, there is three conditions Please note:
- The property must be sold no later than December 31 of the year following the year in which you transferred your tax residence abroad;
- The property must remain unoccupied (neither rented nor loaned) in the meantime;
- Your new tax residence must not be located in a tax haven.
If you do not meet these three conditions, you may still be eligible for a partial exemption real estate capital gains tax if you are a national of a member state of the European Economic Area and have been tax-resident in France for at least two consecutive years prior to the sale of the property.
In addition, if you decide to put your Former primary residence available for rent, you are eligible for a partial exemption of up to €150,000 on capital gains in the event of a subsequent sale (up to 10 years after you move abroad).
How can you make a profit on the sale of a property in Paris's 16th arrondissement?
Would you like to buy a property in Paris's 16th arrondissement to sell it in a few years and make a profit? Do you want to make sure you qualify for tax exemptions on this type of transaction?
All of the information above applies to your situation.
Of course, it may be a good idea to seek the help of a real estate expert to get personalized advice. This is especially true in the 16thth district of Paris, where the real estate market has its own unique characteristics. A trusted partner, who is familiar with this market as well as the conditions for exemption from capital gains tax on real estate, is therefore the ideal choice.
That’s exactly what CENTURY 21 New Auteuil Immobilier, our real estate agency in Paris’s 16th arrondissement, offers you. Our real estate advisors ensure that you make profitable real estate transactions by maximizing your capital gains (while minimizing your tax rate). Contact Us or stop by our office. We’ll discuss your real estate project together!
