Real estate wealth tax and donations: the way forward

The property wealth tax (IFI) is a declaratory tax. It is therefore the taxpayer who must calculate if his real estate assets exceed 1.3 million euros, triggering threshold of the IFI.

► Who should pay the IFI?

Successor of the wealth tax (ISF) since 2018, the IFI has taken up the main characteristics (amount, calendar, rate …). With one major difference: the tax base only takes into account the property assets.

→ READ. Coronavirus: the re-establishment of the ISF again in debate

The exclusion of all financial assets (equities, life insurance, etc.) mechanically reduced the number of taxable persons. In 2019, just under 140,000 households were subject to the IFI, while the former ISF had affected more than 350,000 households in 2017, the last year before its replacement.

Taxpayers declaring a taxable net property heritage of more than 1.3 million euros are liable to the IFI. In this case, they must fill out a specific form which must be returned or validated online at the same time as the traditional tax return, the deadline for which was extended by the Covid-19 crisis, spanning between June 4 and 12 depending on the departments.

► What goods, what rate?

The IFI relates to the net real estate assets, after deducting what remains to be paid from the related loans. It concerns all real estate, primary or secondary residence as rental property.

The goods must be assessed by the taxpayer according to their theoretical value at 1er January of the tax year. The main residence nevertheless benefits from a 30% discount and the goods necessary for professional activity are excluded from the assessment.

► Calculation by tax household

The IFI also concerns the “paper stone”, that is to say the securities of companies managing a property portfolio, SCI or SCPI. As for the ISF, the base of the IFI is calculated at the level of the tax household: whether the household has one or two parents, and whatever the number of children, the threshold remains the same.

The tax rate is similar to that of the former ISF. It starts at 0.5% and peaks at 1.5% for the share exceeding 10 million euros. However, there is a cap limiting the taxation of households with large real estate assets but low incomes. In this case, the IFI is reduced so that the total of contributions and taxes (IFI included) of the household does not exceed 75% of this income.

► What reduction for donations?

The transition from the ISF to the IFI eliminated the reduction formerly granted to wealthy households investing in the capital of certain companies. However, it did not change anything for donations, neither on the amount of the reduction nor on its ceiling.

Donations can be made until the day taxpayers file the IFI declaration. They are entitled to a tax reduction equal to 75% of the amount of the donation, up to a limit of € 50,000.

Unlike donations deducted from income tax, IFI donations must however be made for the benefit of certain very specific categories of organizations, in particular foundations recognized as being of public utility, as well as research centers or insertion through activity.

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The declaration of the IFI is compulsory

The procedures for declaring property tax (IFI) are the same for all taxpayers. The declaration is compulsory. Those subject to the IFI are excluded from the new tacit agreement which consists of not changing anything in their pre-filled tax return. Any French resident (or non-resident but with a tax obligation in France) can declare his IFI with his declaration of income using the online declaration (you must then check the box “real estate” in the table at the beginning of the step 3). Since 2019, taxpayers whose main residence is equipped with Internet access must do so. From 2020, they will no longer receive a paper pre-filled declaration by post. If the IFI is declared with the paper form, the taxpayers concerned will receive a form 2042-IFI at their home. As with income tax, the paper declaration must be returned to the managing department. Important point: the deadline for filing will depend on the method of declaring income (paper or online) and the department of domicile, and no longer according to the value of the property assets held.

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