LMNP reform: depreciation write-back before capital-gain calculation

1. Context: why this LMNP reform

The 2025 Finance Act introduces a significant change to the LMNP regime (non-professional furnished rental). One of the legislator's objectives is to reduce tax distortions between different rental modes — in particular between bare and furnished rentals.

Until now, depreciation deducted under LMNP significantly reduced taxable rental income without being recaptured on resale. This double tax optimisation is now being challenged.

2. What actually changes in 2025?

• From 1 January 2025, depreciation charged over the years under LMNP must be added back to the capital-gain calculation base at sale.
• The acquisition price used for the capital gain is increased by cumulative depreciation, mechanically increasing the taxable gain.
• The measure aims to align the tax treatment of professional and non-professional furnished landlords.

3. How the taxable gain is now calculated

Before reform: taxable gain = sale price − acquisition price (excluding depreciation).

After reform: adjusted acquisition price = purchase price − cumulative depreciation. Taxable gain = sale price − (purchase price − depreciation). The base is taxed at income tax (19%) + social contributions (17.2% in 2025).

4. A numeric example

Scenario: purchase price €200,000, cumulative depreciation €50,000, sale price €300,000.

Before the reform: taxable gain = 300,000 − 200,000 = €100,000.

After the reform: adjusted acquisition price = 200,000 − 50,000 = €150,000, taxable gain = 300,000 − 150,000 = €150,000.

The tax charge at resale can increase significantly.

5. Impact for LMNP investors

• The write-back mechanically increases the tax charge at resale, especially for investors with heavy depreciation.
• Holding-period allowances remain: full income-tax exemption after 22 years, full social-contribution exemption after 30 years.
• LMNP is not dead, but resale profitability must be carefully anticipated.

6. Who it applies to (and who it does not)

• Concerned: property leased under classic LMNP (excluding service residences).
• Not concerned: some service residences (student, senior, licensed EHPAD) benefit from an exemption.

7. Strategies to anticipate the reform

• Extend holding period to maximise allowances.
• Rethink depreciation: moderating depreciation can limit the resale tax bomb.
• Study alternative structures (SCI subject to CIT, switch to bare rental before sale).
• Run tailored simulations with a chartered accountant.

8. Conclusion: rethink your LMNP strategy?

The 2025 LMNP reform marks a turning point for furnished-rental investors. But it is not the end of the regime: holding-period allowances can mitigate the impact.

Our recommendation: use this moment to review your wealth strategy with a chartered accountant and recalibrate based on your objectives.