The capital gain realized on a property sale is subject to a specific tax. - IStock / City Presse

Favorite investment of the French, the stone allows to build a heritage in the duration and to reap substantial profits. However, the State also takes care to recover its share of the pie. The capital gain that an individual realizes by selling real estate is indeed taxable on income.

How is this taxation orchestrated? Denis Roche, tax specialist at AFG Consultants in Montpellier and author at Lexis Nexis, gives the instructions.

How is a real estate gain calculated?

This is the difference between the sale price of a property and the price at which you acquired it (plus registration fees), whether during a classic purchase or by inheritance for example. When you sell it more expensive, you realize a capital gain which is taxable.

That being said, it can be reduced by taking into account the improvements you may have made to the building. From five years of possession, a flat rate of 15% representative of the work can be applied to the purchase price of a built building, without having to provide any justification. If you have undertaken real construction or reconstruction work, you will have to justify them to the real.

On which transactions does this tax apply?

In principle, the capital gains tax applies on any transfer for consideration, in other words on any sale or exchange of built or undeveloped real estate (buildings, outbuildings, parking lots and land). Conversely, the donation is not affected. The law also provides for several cases of exemptions. At the top of the list, you are not liable for this tax when you sell your principal residence and its "immediate and necessary dependencies". Land, parking or independent studio at the bottom of the garden must therefore be part of the same lot as your home to not be taxed. Since 2019, this exemption has also been extended, under certain conditions, to French people who move to another country of the European Union.

Among other common exceptions, we can cite the case of low-income households respecting an income ceiling, that of seniors whose domicile is sold within two years of entering their retirement home, or even the disposal of property whose value is less than or equal to 15,000 euros. Typically, the sale of a parking lot is exempt from capital gains tax.

Who declares the capital gain and what is its taxation?

Since 2004, the notary has been responsible for carrying out the capital gain declaration on behalf of the seller. The tax is therefore paid at the time of the final signature of the transfer. As for its amount, it all depends on the duration during which the property belonged to you.

In the first five years of possession, taxation reaches 36.2% (19% in respect of taxation and 17.2% of social security contributions). A surcharge is added as a bonus when the capital gain exceeds 50,000 euros. Beyond that, you benefit from a declining diet. But beware, the deduction is not the same for tax and social security contributions. You have to wait twenty-two years to sell your property while being completely exempt from capital gain, while you will have to wait thirty years to also escape social security contributions.

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Practical case

Whatever the calculation, the longer you wait to sell, the less the tax will be. You can perform a simulation on Notaires.fr, the site of the Higher Notary Council. We took the test using the example of a second home bought for 250,000 euros and sold for 300,000 euros. The simulator automatically integrates the registration fees during the purchase (7.5%), which brings the taxable capital gain to 31,250 euros. In case of sale after two years of possession, it will cost you 11,313 euros in taxes. On the other hand, after six years, the costs and the flat rate applied for the work allow the purchase price to be inflated by bringing it to 306,250 euros. The gain falling to zero, so there is no tax to pay.

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