Selling real estate can result in a capital gain. This is the case if you sold your home for more than you paid for it. This capital gain is generally subject to income tax and social security contributions. In some cases, however, you may be able to avoid this taxation by qualifying for an exemption on capital gains from real estate. Discuss this with your L’Agencerie.
When do you have to pay capital gains tax on the sale of a home?
Taxation on real estate capital gains applies to:
- the sale of real property, whether developed or undeveloped;
- the sale of rights attached to real property;
- the sale of property or rights through a real estate partnership (not subject to corporate income tax) or a real estate investment trust (REIT).
Capital gains tax applies regardless of whether your tax residence is in France or abroad. It also applies to the exchange of property, the division of property, or the contribution of property to a corporation.
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In what cases is a capital gain on real estate exempt?
The primary residence
When you sell your primary residence, you are exempt from capital gains tax on the property, regardless of the nature or length of ownership. For this exemption to apply, you must live in the home for most of the year. It must also be your primary residence at the time of sale.
Are you no longer living in the home at the time of sale? The tax authorities generally grant you one year to sell your home. Thus, as long as you meet certain conditions, you can still take advantage of the exemption.
The length of time the property is held
The amount of tax on your capital gain is subject to a deduction proportional to the length of time you have owned the property. However, you may be exempt from this tax.
| Holding Period | Income tax | Social Security Contributions |
| Over 30 years | Exempt | Exempt |
| More than 22 years | 6% reduction per year | 9% reduction |
| 22 years of age or older | 4% deduction | 1.6% reduction |
| Ages 6 to 21 | 6% deduction | 1.65% reduction |
Selling a second home
You may be exempt from capital gains tax on the sale of a second home, under certain conditions. In particular, you must use all or part of the proceeds from the sale to build or purchase a primary residence. This must be completed within two years of the sale of the property.
The exemption does not apply if you own, either directly or through a third party, a primary residence at the time of the sale. This is also the case if you owned a primary residence during the four years preceding the sale of your second home.
Exemption in the Case of a Low Sale Price
If you sell a property worth less than €15,000, you are automatically exempt from capital gains tax. This threshold is raised to €30,000 for married couples. This exemption applies even if you sell multiple properties in the same year.
The Case of Retirees or Disabled Persons of Modest Means
Retirees or disabled individuals of modest means may be eligible for an exemption from capital gains tax on the sale of their primary residence. To qualify, they must not be subject to real estate wealth tax. Their taxable income must not exceed the limits set forth in Section II of Article 1417 of the General Tax Code.
The Case of Non-Residents
Nonresidents are eligible for a full exemption from capital gains tax on real estate.
The Transfer of a Right to Add a Story
The sale of a right to add a story to a building is exempt from capital gains tax on real estate.
Sale to Support Social Housing
Sales of real estate to social housing organizations are fully exempt from capital gains tax. However, the seller must be a tax resident of France.
Similarly, an exemption is possible if the property is sold indirectly to a local government through a public intermunicipal cooperation agency. This also applies to properties transferred to a public land agency for the purpose of transferring them to an organization responsible for
Exemption in the Event of Expropriation
Capital gains on real estate resulting from expropriation are tax-exempt if:
- The expropriation follows a declaration of public necessity;
- The compensation must be used for the purchase, construction, reconstruction, or expansion of a building. This must be done within one year of the date the compensation is paid.
L’Agencerie –
