The status of non-professional furnished rental property owner, commonly referred to by the acronym LMNP, remains a key tax regime for rental real estate investments. It allows an individual who rents out a furnished dwelling to classify the income as industrial and commercial profits, while benefiting, under certain conditions, from the micro-BIC regime or the actual income regime.

However, the LMNP is gradually evolving. Lawmakers are now seeking to limit windfall gains associated with property depreciation and to better distinguish between furnished rentals intended as primary residences and short-term rentals for tourism purposes.

 

A reform already in effect regarding capital gains

The Principle of Reinstating Depreciation

The main change stems from the 2025 Finance Act. As of February 16, 2025, Article 150 VB of the General Tax Code stipulates that the acquisition price used to calculate capital gains on real estate is reduced by the amount of depreciation allowed as a deduction under Article 39 C of the same Code.

In practical terms, an investor who purchased a home for 250,000 euros and deducted 50,000 euros in depreciation will no longer, in principle, be able to calculate the capital gain based solely on the difference between the sale price and the initial purchase price. The calculation basis will be increased by including the depreciation previously deducted.

This reform does not call into question depreciation during the holding period. However, it reduces the overall benefit by deferring a portion of its tax cost until the time of sale. The LMNP actual tax regime therefore remains attractive for reducing or offsetting annual taxation on rental income, but it is less favorable when an investor quickly resells their property at a significant capital gain.

An important exception for certain assisted living facilities

The recapture of depreciation does not apply to certain properties located in residences intended specifically for students or seniors. Article 150 VB applies to residences covered, in particular, by Articles L. 631-12 and L. 631-13 of the French Building and Housing Code, provided that the conditions specific to these structures are met.

This exclusion reflects a desire to maintain tax support for investments that contribute to the supply of specialized housing. It applies in particular to certain university housing facilities and assisted living facilities intended for the elderly or students. However, it should not be interpreted as a general exemption applicable to all assisted living facilities. The legal classification and actual use of the building must be verified on a case-by-case basis.

Maintaining the Distinction Between LMNP and LMP

The LMNP status remains defined in contrast to the status of a professional furnished rental landlord. Article 155 of the General Tax Code provides that the activity is considered professional when the annual income of the tax household exceeds 23,000 euros and exceeds the household’s other professional income subject to income tax.

Both conditions must be met. Simply exceeding the 23,000-euro threshold is therefore not sufficient, on its own, to trigger an automatic transition to LMP status.

The 2026 Finance Act, however, clarified the assessment of the second condition for non-resident taxpayers. Comparable foreign business income must now be taken into account when it is subject to a tax equivalent to income tax in the country of residence. This change directly affects French investors living abroad and non-resident taxpayers who own furnished properties in France.

Maintaining this distinction is important because switching to the LMP status can have implications for the treatment of losses, social security contributions, the transfer of assets, and capital gains tax rules. The analysis therefore cannot be limited to the amount of rent received.

The Phased Elimination of Older Tax-Reduction Schemes

The LMNP regime is often presented as a tax-exemption scheme. This characterization has become inaccurate when referring to the Censi-Bouvard scheme.

The Censi-Bouvard tax reduction applied to purchases made through December 31, 2022, subject to specific rules applicable to properties purchased off-plan or undergoing renovation. Administrative doctrine notes that the transactions in question had to meet certain conditions, particularly regarding the nature of the residence and the rental commitment.

The current LMNP scheme therefore does not, in and of itself, constitute a direct tax reduction. Its appeal lies primarily in the treatment of rent and expenses, particularly when the investor opts for the actual income method and can deduct eligible expenses as well as depreciation within the limits set forth in the General Tax Code.

This distinction is essential in the commercial presentation of such transactions. An LMNP investment must be analyzed based on its economic profitability, its financing, the financial strength of the tenant or operator, and its resale value. The tax benefit can no longer be presented as a guarantee of performance.

Proposed Changes Still Under Discussion

Toward a Common Tax Category for Residential Rentals

In the Senate, an amendment introduced as part of the bill on housing recovery and decentralization proposed creating a single tax category for income derived from the rental of housing intended to serve as the tenant’s primary residence, regardless of the nature of the lease. This proposal would have excluded furnished tourist rentals and hotel or hotel-like activities [citeturn0search1].

The goal was to align the tax treatment of unfurnished rentals with that of furnished rentals when the property serves as a primary residence. Such a reform could reduce the comparative advantage of the traditional LMNP (non-professional furnished rental) scheme, while maintaining a distinction in treatment for tourist rentals.

However, this amendment was withdrawn. It therefore does not, at this stage, constitute an applicable rule. Nevertheless, it reveals an important policy direction aimed at reserving the most significant tax benefits for rentals that contribute sustainably to the housing supply.

Raising the Thresholds for Property Losses

Another amendment considered in July 2026 proposed doubling several caps on the offsetting of property deficits against income starting with the 2027 tax year. The amendment was withdrawn [citeturn0search0].

This proposal does not directly alter the LMNP status. However, it is part of a broader context of competition between unfurnished and furnished rentals. Strengthening the property deficit regime could make unfurnished rentals more attractive and reduce the relative appeal of the LMNP for certain investors.

The choice between unfurnished and furnished rentals could thus depend more on investment strategy, the holding period, the scope of renovations, and the tenant’s profile, rather than on a systematic tax advantage in favor of furnished rentals.

Possible Tightening of the Regulations Governing Tourist Rentals

Recent parliamentary debates have also focused on the regulation of furnished tourist rentals. Several amendments have proposed reducing the tax benefits associated with short-term rentals or modifying the rental caps for primary residences [citeturn0search2] [citeturn0search7].

These proposals mainly concern tourist rentals and should not be confused with traditional furnished rentals intended for residential use. They may nevertheless affect certain taxpayers who use the LMNP status to list properties on short-term rental platforms.

The general trend is clear. The legislature seeks to distinguish between furnished properties intended to provide long-term housing for an occupant and those used as tourist accommodations. Investors will therefore need to carefully examine the duration of the rentals, the target clientele, local permits, and the regulations applicable in their municipality.

Practical Consequences for Investors

The first consequence is that the holding period becomes a decisive factor. The actual income tax regime can remain very favorable during the operational period thanks to deductions for expenses and depreciation. However, the impact of recapturing depreciation must be factored into any resale scenario.

The second implication concerns profitability analyses. A thorough simulation must now present at least two scenarios. The first must calculate the annual tax liability over the holding period. The second must factor in the taxes applicable at resale, taking into account the depreciation already deducted and the length of time the property is held.

The third implication concerns serviced residences. The presence of a commercial lease and an operator does not guarantee the profitability of the investment. The quality of the operator, the level of rent, indexation clauses, repairs to be borne by the owner, lease renewal conditions, and the property’s liquidity must be examined separately.

Recent case law also notes that real estate tax-avoidance schemes may result in liability for professionals when their obligations to provide information and advice are not met. It further emphasizes that compensation requires proof of actual damage directly caused by the alleged breach. This requirement is particularly evident in decisions rendered in litigation involving LMNP investments in assisted living facilities.

A Shift Toward a Less Uniform Status

The LMNP is not going away. However, it is becoming less uniform.

Tax treatment now depends more on the nature of the property, its intended use, the type of lease, the taxpayer’s status, and the exit strategy. A residence rented on an annual basis to a student, an apartment operated as a serviced residence for seniors, and a residence offered on a nightly basis to tourists may be subject to very different tax and regulatory frameworks, even if each is marketed as an LMNP investment.

This shift makes standardized structures riskier. Marketing materials that focus solely on tax savings without detailing the tax implications of resale, dependence on the operator, or the property’s liquidity are likely to present an incomplete picture of the transaction.

Conclusion

As of September 24, 2026, the LMNP status remains in effect, but its economic balance has been altered by the reinstatement of depreciation in the calculation of capital gains on real estate, except for certain categories of specialized residences. The legislative proposals currently under consideration aim to align the taxation of residential rentals and reduce the benefits associated with furnished tourist accommodations.

Investors must now consider the entire asset lifecycle. The analysis must take into account annual taxation, financing, operational stability, regulatory constraints, and the tax implications of resale. The LMNP may still be relevant, but it can no longer be presented as a simple tax avoidance mechanism.