France's 2027 Budget: The Proposed LMNP Depreciation Cap and What It Means for Furnished-Rental Landlords
If you let a furnished property in France under the LMNP regime, the draft 2027 budget (PLF 2027, tabled on 1 October 2026) contains a change aimed squarely at you: a cap on the depreciation you can deduct each year. It's one of the measures with the broadest reach, around a quarter of landlords are said to use LMNP, and it would meaningfully raise the tax on furnished rental income. As with everything in the draft budget, this is a proposal in debate, not adopted law; Parliament can still change, toughen or drop it.
What LMNP depreciation does today
Under the LMNP régime réel, you can depreciate the value of the property (excluding land) and deduct it from your rental income. Current accounting practice allows depreciation of roughly 4% of the building's value a year. That depreciation is what lets so many furnished landlords collect rent while declaring little or no taxable profit, often for years. It's the core of the regime's appeal.
What the PLF 2027 would change
The draft budget would cap that depreciation:
Standard furnished lettings (LMNP at the régime réel): depreciation limited to 2.5% of the property's value a year, and no more than €7,000 a year per tax household.
Tourist/short-term furnished lettings: a tighter cap of 1.5% and €5,000 a year.
Micro-BIC: untouched, because its flat allowance is deemed to already account for depreciation.
The effect is mechanical: depreciation reduces your taxable rental profit, so capping it means less is deducted and more rent becomes taxable.
A worked example
Take a property worth €400,000 (excluding land).
Today: at around 4%, you could depreciate roughly €16,000 a year.
Under the proposal: 2.5% would give €10,000, but the €7,000 annual ceiling caps it there.
That's a swing of around €9,000 of additional taxable profit a year on that property, taxed at your marginal rate plus social charges. The more expensive the property, the harder the ceiling bites: on a €250,000 property, depreciation would fall from about €10,000 to €6,250; on anything above €280,000, the €7,000 cap is what decides.
What happens to the depreciation you can't deduct
This is where it gets stricter. For financial years from 1 January 2027, the portion of depreciation above the cap would simply be lost, not carried forward. In the example above, if €10,000 of depreciation is limited to €7,000, the remaining €3,000 disappears.
Depreciation already banked before 1 January 2027 wouldn't vanish, it could still be used until 31 December 2036, but only up to half of the taxable profit (calculated under the new rules) in any year. A practical tip that follows: it's worth drawing up a statement of your carried-forward depreciation at the 2026 year-end, so you know what stock you're sitting on.
Don't forget the resale sting
There's a second layer worth remembering. Since the 2025 Finance Act, the depreciation you deducted is added back into the capital gain when you sell. Combine that with this new cap, and the overall cost of holding then selling a furnished rental goes up at both ends: you deduct less along the way, and you're still taxed on what you did deduct when you exit.
The takeaway
If this passes as drafted, the LMNP régime réel would keep working, but its headline advantage, sheltering rent behind generous depreciation, would be significantly trimmed from 2027, especially on higher-value properties where the €7,000 ceiling does the real work. Nothing is voted yet, so there's no need to rush into decisions. But if a furnished rental is central to your plans, this is the moment to model your taxable income under the proposed cap and to inventory your existing depreciation before the 2026 year-end.
Letting furnished property in France and unsure how the 2027 budget affects you?
If you are an expatriate living in France and want to understand how the proposed LMNP depreciation cap would affect your rental income and your plans, you can book a free introductory call to discuss your situation and identify the key points that should be checked.
Disclaimer: This article is for general information and educational purposes only. It describes a proposal in the draft 2027 Finance Bill, which is not adopted law and may change. It is based primarily on official French government sources and other trusted references, and does not constitute personalised tax, legal or financial advice. The figures are illustrative; tax outcomes depend on individual circumstances and the property concerned.
