August 1, 2021

What you need to know about the tax consequences of a change of residence

During confinement, you more or less settled in your second home. Then, seduced by this living environment, you decided to spend most of your time in the countryside, thanks to teleworking, while going a few days a week or a month to the big city where your office is located. To make your life easier, you plan to keep your current home and transform it into a second home. Beware, this move will have tax consequences.

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The first of these is the impact on your local taxation. The 2020 finance law ratified the abolition of the housing tax, with the reform gradually applying, first to the most modest households. If you are among those with the highest incomes, you will have to wait until 2023 to stop paying it.

Attention, “The general exemption from housing tax only affects main residences, not second homes”, warns Christophe Chaillet, director of wealth engineering at HSBC Continental Europe. As the municipalities and departments set the tax rate, depending on your choice of main residence, the amount of your taxes may therefore vary greatly. Another point deserves to be examined: your former main residence, which will therefore become secondary, is located in a city where the rental market is “tight”?

Because many of them levy a housing surcharge. It only concerns second homes, and its rate varies from 5% to 60%, the percentage being decided by an annual vote of the municipal council. If your real estate assets exceed 1.3 million euros, you are liable for the real estate wealth tax (IFI). However, the main residence benefits from a reduction of 30% on its value, which is not the case for the secondary residence, taxed on 100% of its price. If you move from a city where real estate is very expensive to an area where it is more affordable, a change of primary accommodation could therefore increase your tax base.

Capital gains tax exemption

A move will also have an impact in the event of the transfer of your new principal residence immediately after your installation. Especially if it is located in an area where prices have risen a lot. The reason ? The sale of a principal accommodation is exempt from capital gains tax. Many unscrupulous taxpayers organize a move to escape the tax authorities.

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