LMNP tax losses: the 10-year carry-forward explained
By Juliano Majally · · 6 min read
An LMNP loss only offsets furnished-rental profits over the next ten years, never your salary. Where it comes from, deferred depreciation, the 2042 C-PRO boxes.
“With the réel, you’ll make a loss and pay less tax on your salary.” I’ve heard it several times, and for an LMNP it’s wrong. The loss (déficit) exists, but it stays locked in its own category. Here is how it works, and what it’s really worth.
Where an LMNP loss comes from
Under the réel, the year’s result is rent minus expenses minus depreciation. But article 39 C of the French tax code forbids depreciation from creating a loss: the charge is capped at the profit before depreciation, and the excess is deferred. So an LMNP loss can only come from expenses: a big year of deductible repairs, purchase costs expensed in year one, high loan interest with little rent (an empty flat, a short first year), or simply a flat whose costs exceed its income.
Example: €9,000 of rent, €12,000 of expenses (including €7,000 of notary fees expensed), €6,000 of depreciation. Result before depreciation: −€3,000. Depreciation is entirely deferred (€6,000 into the stock), and the year ends with a €3,000 loss.
What the law says
Article 156, I, 1° ter of the tax code: losses from a furnished letting activity carried on on a non-professional basis can only be set against profits from the same non-professional activity made over the following ten years. Not against your salary, not against unfurnished rental income, not against other business income. After ten years, anything unused is lost.
That’s the big difference with unfurnished letting (revenus fonciers), where a loss can be set against total income up to €10,700 a year. And it’s why the réel for an LMNP doesn’t shelter your other income: it brings the tax on your rent down to zero, which is already a lot, but it stops there.
If you live abroad, the rule is the same: the loss only offsets future French LMNP profits. How your country of residence treats a French rental loss is a separate question, governed by its own rules and the tax treaty; ask an adviser there.
Loss and deferred depreciation: two stocks, two rules
| Tax loss carried forward | Deferred depreciation (39 C) | |
|---|---|---|
| Origin | Expenses higher than rent | Depreciation capped at profit before depreciation |
| Lifespan | Ten years | Unlimited |
| Offsets | The household’s LMNP profits | Profit before depreciation, within the same limit |
| Where to track it | 2033-D and boxes 5GA to 5GJ | 2033-D |
The order of use matters, and it isn’t in your favour. In a profitable year, the year’s depreciation and the deferred stock are deducted first, until the result reaches zero; earlier losses only offset what’s left. With a large depreciation stock, there’s often nothing left, and the loss ages without being used. It’s one of the reasons why adding notary fees to the price rather than expensing them is often the safer choice: see the notary fees guide.
Where to declare it
The year’s loss appears on form 2031 and is carried to the 2042 C-PRO, box 5NY (5NZ, 5OZ for other members of the household). Earlier losses not yet used go in boxes 5GA to 5GJ, one box per year of origin: the tax office sets them against your LMNP profits, and it’s up to you to carry them over every year, or they vanish from your return. Form 2033-D tracks both stocks, losses and deferred depreciation. When an accountant stops or you change software, that’s where carry-forwards get lost.
The difference with LMP
A professional landlord (LMP: receipts above €23,000 and above the household’s other earned income) lives in another world: their losses offset total income, with no cap, and the article 39 C limit doesn’t apply to them, so their depreciation can also create a loss set against salary or pension. That’s the main advantage of the status, in exchange for social contributions in every case and a business capital gains regime. Moving from LMNP to LMP isn’t a choice: it depends on the year’s figures and is checked every year. Losses built up as an LMNP before the switch remain, as I read it, usable only against non-professional profits; check this with your SIE if it applies to you. See the €23,000 threshold guide.
What it changes in your decisions
- Don’t chase a loss as an LMNP: it’s worth nothing until you have LMNP profit to absorb it, and it expires.
- Prefer choices that feed depreciation (costs added to the price, works capitalised) over those that create a large expense in one go, unless you know the rent will absorb the loss quickly.
- Carry your losses and deferred depreciation forward every year, even when they aren’t used.
The simulator shows the result of a typical year; to see how a loss is absorbed over several years, you need to keep the accounts.
What Meublé does
At year-end, the app calculates the taxable result in this order: non-deductible CSG, the 39 C cap with the deferred stock, then earlier losses from oldest to newest, leaving out those over ten years old. The year-end stocks are saved with the closing and picked up the following year, and form 2033-D and box 5NY or 5NA are filled from these figures.
Frequently asked questions
- Does an LMNP loss reduce the tax on my salary?
- No. A loss from non-professional furnished letting can only offset profits from the same activity over the following ten years (article 156, I, 1° ter of the French tax code). It touches neither your salary nor unfurnished rental income. Only a professional landlord (LMP) can set losses against total income.
- How long can an LMNP loss be carried forward?
- Ten years. A loss from the 2026 financial year can offset your LMNP profits until the 2036 year; whatever is left after that is lost. Deferred depreciation under article 39 C, on the other hand, has no time limit. Both stocks are tracked on form 2033-D every year, even when unused.
- What’s the difference between a tax loss and deferred depreciation?
- The loss comes from expenses exceeding rent; deferred depreciation comes from the depreciation article 39 C stops you deducting because it would create a loss. The first expires after ten years, the second never. In a profitable year, depreciation is used first and the loss only offsets what remains.
- Which box do I use to declare an LMNP loss?
- The year’s loss goes in box 5NY of the 2042 C-PRO (5NZ or 5OZ for other household members). Earlier losses not yet used go in boxes 5GA to 5GJ, one per year of origin. Forget to carry them over one year and they disappear from your return.