Are management fees deductible from your taxes?

1- What are the conditions?

The costs and expenses declared must relate to a property that is the subject of a rental agreement and that provides you with real estate income.

Thus, you cannot deduct expenses related to a vacant dwelling or a dwelling used as a principal or secondary residence.

After declaring the rent received, you can deduct the costs and expenses related to the rented accommodation from this amount. To be deductible, the expenses must meet certain general conditions, which apply regardless of the category of expenses involved.

Expenses must be paid in the year to be deducted from that year's income.

Thus, you deduct from your 2019 property income the expenses paid in 2019;

You must be able to present proof of these expenses to the tax authorities upon request. It is therefore important to keep all documents related to these expenses (invoices, etc.).

2- The different tax systems

There are two tax regimes for both furnished and empty properties: the flat rate regime and the actual regime.

The flat-rate system offers a fixed percentage of deduction (30% for empty and 50% for furnished), so the taxman deducts the deduction from the amount of rent received and the balance is then added to the other income for the year.

The main interest of the flat rate system lies in its simplicity. It is also financially interesting in the case of a furnished rental with limited expenses. (Loan interests paid off, no work planned or low co-ownership charges).

The owners of furnished apartments often opt for the real regime, because the flat rate of 50% is insufficient.

By choosing the real regime, you will be able to deduct all your expenses and charges for their real amount.

The real regime is certainly more complicated to declare, but don't worry: the France Ermitage experts will take care of your tax returns!

Note that in furnished rental the real regime is even more interesting, because to all the deductions stated below is added the depreciation of the value of the accommodation.

This makes it possible to limit and sometimes even eliminate the taxation of rents.

3- What are the expenses concerned?  

• Fees or commissions paid to your property manager if you do not manage your rentals yourself.
• The fees of the person responsible for keeping the accounts of your property.
• Commissions paid to an agency that conducts the search for a tenant and the drafting of rental agreements.
• The amount of expenses you have incurred on behalf of your tenants and for which you have not been reimbursed, as of December 31 of the year the tenant left.
• Repair, maintenance and improvement expenses. (They are related to the work allowing to put back or to maintain the real estate in good condition).
• Remuneration of guards and janitors.
• Insurance premiums (regardless of the risk covered, all insurance premiums relating to rented accommodation are fully deductible.
• Certain taxes (those relating to the rented accommodation and payable by the owner are deductible. In particular, the following may be deducted: the property tax; the special equipment tax; the annual tax on parking areas; the contribution on rental income, where this still exists).
• Interest on loans (taken out for the acquisition, construction, repair, improvement or conservation of the rented accommodation. The deduction applies not only to the interest, but also to the costs of the loan such as the costs of preparing the file and mortgage inscriptions. Be careful when filling out your return, only the interest is deductible, not the monthly payments you make to repay your mortgage.

Note that the management fees covered by your provisions for condominium expenses are not deductible on the lines of the return relating to management fees, but on the lines of the return dedicated to condominium provisions.

4- What are the costs of the procedures concerned?

• The fees of a notary, a lawyer, a bailiff or an expert, relating to the procedures which concern you for the settlement of disputes, with your tenant, with a contractor or with a service provider.
• The costs of proceedings remaining at your expense following a lawsuit or the costs of proceedings concerning the settlement of disputes over the ownership of a rented building.

These expenses are all deductible for their real and justified amount: it is thus advisable to inform the tax authorities that you wish to declare your real estate income.

Other management costs are deductible thanks to a fixed allowance of 20€ per rented property:

These are the "small" expenses that you incur for the administration and management of your leased properties (correspondence, travel and telephone; expenses for the acquisition of equipment, tools, office furniture, computer equipment and software...)

These tax deductions are not negligible!

You don't know if the expenses you plan to deduct are actually concerned: At France Ermitage, whether your apartment is empty or furnished, we can help you declare your landed income or industrial and commercial profits!