Are you looking to reduce the amount of your tax payable in 2024? So look into suitable schemes before the end of December 2023… while keeping in mind the different reduction ceilings!
In France, there are multiple tax loopholes. For as many sectors of activity or investments that the State seeks to promote in order to direct the spending and savings of the French.
This is the case with the recognized Pinel system, which encourages taxpayers to invest in rental real estate and support the construction of housing. Or the lesser known FCPI, which helps guide investors towards innovative companies.
But many of these potential tax reductions are subject to the same overall cap, set at 10,000 euros of income tax reductions. Each tax household, regardless of the number of people within it, is therefore limited to a reduction of 10,000 euros each year. Except… there are exceptions. Point by category.
Which is subject to the overall ceiling of 10,000 euros per year
Investment in SMEs. A tax reduction of 25% in 2023, compared to 18% in normal times. At the end of the year, money invested in the capital of an SME (directly or via a crowdfunding platform, for example) will therefore allow you to benefit from a reduction equivalent to 25% of the amount invested, on your 2024 tax , which relates to 2023 income. This system is nicknamed Madelin or IR-PME.
FCPI and FIP. As for IR-PME, innovation mutual funds and local investment funds allow you to benefit from a 25% reduction in the sums invested, within the limit of a ceiling of 12,000 euros for a single person. , either 3000 euros maximum reduction. This reduction can be doubled by investing in FIPs and FCPIs. Accessible to all taxpayers, investment in FIP Corsica and overseas entitles it to a higher reduction, up to 30% of the sums invested in 2023.
Rental investment. The Pinel system (in new buildings) and the Denormandie system (in old buildings with renovation) take the form of a tax reduction conditional on the rental of the property for a minimum of 6 years. In Denormandie, the reduction is still 12%, 18% or 21% of the amount of the acquisition within the limit of 300,000 euros, for a rental of 6, 9 or 12 years. In Pinel, the reduction rate is now lowered to 10.5%, 15% or 17.5%, rates which will drop in 2024 for investments made after next January 1. The reduction is therefore spread over several years, i.e. 2% per year in Denormandie, and a little less in Pinel: for an investment made in 2023, the maximum reduction is thus 6,000 euros on the 2024 tax for Denormandie, and 5,250 euros for Pinel. The Pinel and Denormandie tax reductions are accessible for direct investment, but also via Pinel SCPIs: SCPIs invested in housing eligible for this system.
In terms of investments, also included within the framework of this overall cap of 10,000 euros are forestry investments or even the subscriptions to the capital of press companies.
Expenditures falling within the overall ceiling of 10,000 euros
This overall capping of tax loopholes also includes certain tax advantages linked to current expenses: the tax credit for child care expenses under 6 years old, employing a live-in employeeetc.
| Spending in 2023 | Tax reduction or credit | Amounts subject to capping | |
|---|---|---|---|
| Investment in FCPI | 4000 | 25% | 1000 |
| Rental in Pinel | – | 1.75% of initial investment (200000) | 3500 |
| Home employment | 8000 | 50% | 4000 |
| Overall tax benefit subject to capping of 10,000 | 8500 | ||
Devices that benefit from the ceiling of 18,000 euros per year
The tax administration provides for a higher ceiling for certain targeted investments. Please note: these are not two cumulative ceilings! If a taxpayer optimizes his tax reductions within the framework of the overall ceiling of 10,000 euros, then he only has 8,000 euros of potential reductions left for the investments mentioned below.
Overseas Pinel system. The principle of Pinel overseas is the same as for Pinel in mainland France but it concerns new or similar housing acquired overseas. The tax reduction this time reaches 21.5%, 26% or 28.5% of the amount invested depending on the rental period, always a minimum of 6 years. The maximum taken into account for the amount of the acquisition is again 300,000 euros, which represents a maximum reduction of 10,750 euros per year for a 6-year commitment.
Overseas investment. More generally, several types of investments overseas benefit from the ceiling of 18,000 euros, first and foremost the social Girardin and the industrial Girardin.
Investment in cinema. Soficas finance audiovisual and film productions. By acquiring Sofica shares, the subscriber can benefit from a tax reduction of 30% of his investment, or even 36% or even 48% in certain cases, on condition of committing to maintain the investment for a minimum of 5 years. There maximum reduction for the 2024 tax on 2023 income is therefore 8640 euros.
High tax gain = risk of financial loss
As long as the conditions are met, the announced tax gains are assured. On the other hand, all these investments (from FCPI to Sofica) guarantee you neither financial performance, nor sometimes the recovery of your entire capital. A risk that must be borne in mind before investing: the investments offering the highest tax gains actually serve primarily to reduce your taxes, not necessarily to grow your savings.
5 pitfalls to avoid before tax exemption
What ceiling for investments in previous years?
If you have already invested in tax-exempt investments in recent years, don’t forget to take them into account in 2023. Example: a rental investment with the Duflot device in 2014 allows you to benefit from a tax reduction each year, for 9 years. The annual amount of the Duflot reduction must therefore be taken into account in the calculation of the overall cap of 10,000 euros, in the same way as an investment in Pinel made in 2018 like the example detailed in the table above.
Benefits that escape the tax shelter ceilings
PER and retirement savings products. Payments made at the end of 2022 to a Retirement Savings Plan are directly deductible from taxable income. They are therefore not taken into account in the overall ceiling of tax shelters.
However, there is a specific ceiling for these payments, which you will find indicated on your tax notice: ceiling for contributions paid in 2023 in the retirement savings ceiling section. This logic of tax deduction also applies to payments on old Perp, on Madelin retirement contracts, or even on Prfon contracts for civil servants.
Retirement savings plan: who should open an individual PER?
The land deficit. A real estate investor subject to the real tax regime can generate a deficit on his property(ies), most often by carrying out work, in order to deduct these costs from his overall income. However, this system is itself subject to its own ceiling: 10700 euros per year, with the possibility of being carried over to subsequent years if the deficit generated exceeds this threshold. This ceiling was even increased to 21,400 euros in the case of work which allows a property to move from class E, F or G to class A, B, C or D.
Malraux devices and historical monuments. The Malraux system allows you to benefit from a work envelope of up to 100,000 euros for buildings located in certain protected areas and intended for rental. With key deductions ranging from 22% to 30%. As for the historic monuments system, it allows you to benefit from a deduction of 50% or 100% of the cost of the work depending on the case.
All tax exemption schemes
Expenditures reducing income tax, outside the overall ceiling
Very numerous income tax reductions linked to current expenses are not taken into account in the overall capping of tax loopholes: those linked to school fees for childrento retirement home living expensesTHE donations to associations and political parties, union duesor the tax reduction resulting from the effects of the family quotient.
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