Flat-rate scheme or actual costs: a choice that binds

Hélène rents out a one-bedroom flat at 780 € a month, so 9 360 € of rent across the year. Under the flat-rate scheme the tax office keeps only 6 552 €, after a 30 % standard allowance. Under actual costs, her real expenses of 4 100 € bring the base down to 5 260 €. That 1 292 € gap repeats every year — and electing actual costs binds her for three.

Unfurnished and furnished are two different worlds

Unfurnished letting produces property income, taxed on the progressive scale after deductions. Furnished letting falls under trading profits, with its own schemes and the option to depreciate the building itself.

This course covers unfurnished letting only. Mixing the two categories means reporting rent on the wrong return, under a completely different calculation, with deductible costs that do not overlap.

Property income is never taxed in isolation: it joins salaries and the household's other categories before the scale applies. Its real cost therefore depends on your marginal band, not on any rate specific to rent.

Social levies apply under both schemes, on the same base as the tax. Reasoning from the marginal rate alone therefore understates the real burden on property income by several points.

The flat-rate scheme: simple, capped, standardised

The flat-rate scheme applies automatically while the household's gross property income stays below an annual ceiling. No detailed return is required: the rent figure goes straight onto the main return.

That 30 % allowance replaces every actual cost. It is meant to cover maintenance, insurance, property tax and loan interest: generous for an older property with no works, plainly insufficient once a mortgage is running.

The ceiling is assessed on the household's total gross rent, across all properties. A second flat can therefore push an owner into the actual-cost regime even though neither property crosses the threshold on its own.

Actual costs: demanding, but faithful

The actual-cost regime deducts expenses genuinely borne, with receipts to back them. It applies automatically above the flat-rate ceiling, and by election below it, simply by filing the detailed return.

• Loan interest and arrangement fees tied to the purchase or to works.
• Maintenance, repair and improvement works, excluding construction and extension.
• Insurance premiums, including cover against unpaid rent.
• Property tax, excluding the refuse-collection share recoverable from the tenant.
• Management fees, agency charges and non-recoverable service charges.

Those three years are the real constraint. A year of heavy works makes actual costs obvious; the two quiet years that follow can cost more than the 30 % allowance that was given up to get there.

That 1 292 € of extra base is worth roughly 388 € of tax for a household in the 30 % band, before social levies. Across a three-year election, the decision runs into thousands of euros.

The decisive row is the third: the flat-rate scheme can never produce a loss. A year of heavy works is fiscally neutral under it, while actual costs turn the same year into immediate relief against total income.

The practical rule is short: once a mortgage is running, actual costs almost always win, because interest alone exceeds the standard allowance. With no loan and no works, the flat-rate scheme wins on simplicity.

Run both calculations before the first return rather than after. Once the election is made the arithmetic is fixed for three years, and the comparison that would have settled it takes about twenty minutes with the year's invoices to hand.