Pinel real estate investment in the old: principle, conditions and calculation

As a general rule, the Pinel real estate investment system is associated with new real estate.In return for the purchase of new accommodation and its rental, in compliance with certain conditions, the investor benefits from a tax reduction.The tax advantage varies according to the rental commitment granted: 12% of the amount invested for six years, 18% for nine years and 21% for twelve years.The sum chosen for the calculation is capped at 300.Euros and 5.500 euros per square meter.

To find out more: Pinel rental investment, tax exemption in real estate

The principle of Pinel in old real estate

Although little known, Pinel investment in old real estate to rehabilitate also exists.An investor can thus obtain a tax reduction for the purchase of an old uninhabitable accommodation or a room (hangar, garage, commerce, etc.) to be transformed, provided that it will be refurbished and rent it empty.In terms of rehabilitation, this is an interesting opportunity since the operation amounts to acquiring a heritage most often of quality (location, architecture, etc.), generally at the heart of cities and to maximize the creation of value.

The tax reduction rate granted by the State is identical to that conferred by an investment in new housing.

To take advantage of the Pinel tax reduction, donors must respect the system of the system (to see here) while tenants' income must not exceed certain amounts (to consult here).

Given the costs generated (purchase of the property to be renovated or the premises, important works), the investment in old Pinel is less accessible than the purchase and the rental of a new apartment.It is not the same approach either: to go further, find our article "Investment in real estate new Pinel in ten stages".

Namely: that the accommodation is old or new, the Pinel system authorizes rental for adult children not attached tax and to the parents of the investor.

Ancient Pinel law system: what changes in 2021?

As in the new, the Pinel law system in the old one had to end on December 31, 2020.But within the framework of the finance law for 2021, it was again extended until the end of 2024, with however decreasing tax reduction rates for the 1920s and 2024.For the 1920s and 2022, the conditions remained identical, in particular the tax reduction rate and the various ceilings (maximum amount for the calculation of the tax advantage, rent ceilings, tenant resources ceilings).

The zoning has already been the subject of modifications:

For zone B2 and zone C, the government had planned to transiently ensure the eligibility of certain acquisitions to the Pinel system, for which a building permit was issued no later than December 31, 2017, subject to a finalizationpurchase no later than December 31, 2018.

These new parameters also apply to the device in the new.The government has not specifically expressed on the declination of these provisions for the Pinel 2021 law system in the former.

Special conditions and calculation of the Old Pinel tax reduction

The choice of accommodation to be rehabilitated

Not all ancient accommodation is eligible for the Pinel tax reduction.Before the entry into force in 2019 of the old Denormandie system (named after the former Minister of Housing), three types of goods were targeted by the old Pinel, namely:

From now on, rehabilitation works are entitled to the old Pinel reduction concern:

Regarding dilapidation accommodation, their deterioration must be advanced.Eligible goods must not fulfill at least four of the fifteen decency criteria defined in article 6 of law n ° 89-462 of July 6, 1989.Likewise, they must not be suitable for six technical performance criteria in at least twelve.Failure to comply with these criteria must be validated by an authorized expert and independent of the real estate project.

Namely: the criteria of decency and technical performance of the housing are specified in a decree dated December 19, 2003 (see the criteria here).

Renovation work

After rehabilitation or transformation, the accommodation must display high energy performance.He must reach one of the following standards:

In other words, these are heavy work which requires a certain expertise and the use of skilled workers.In rehabilitation, it is necessary, for example, to redo the electrical system, the plumbing, to change the windows, to strengthen thermal insulation ... Likewise, the transformation of a hangar or a trade in housing is not aevidence.The difficulty of the site, the energy performance requirements as well as the scarcity of goods allowing an ancient pinel operation, underline that it is not a project to be carried out alone, without being accompanied by specialists in the rehabilitation ofHousing and/or the transformation of premises.

The work must be completed no later than December 31 of the second year following that of the acquisition of the property.Or December 31, 2022 for an acquisition made before the end of 2020.Balance sheets are carried out before and after the work to verify their smooth running and all the criteria of decency, technical performance and energy performance are achieved.

Namely: the event generating tax reduction is the completion of the work.

*Insulation of the roof or walls overlooking the outside, windows, heating system, domestic hot water production system.

Calculation of the 2021 tax reduction

As in a new Pinel investment, the tax reduction is calculated from the amount unlocked to buy housing, prices and acquisition costs included: we then speak of cost price.This cost price is capped, as for the classic Pinel device, at 300.Euros.

Upon purchase, the price of old housing as such can be less than in new, since the goods to be renovated are the subject of important relevant decrees on the real estate market.Nevertheless, the overall investment budget selected within the framework of the old Pinel is increased by the amount of part of the work.

The work to remember

All work is not eligible for the calculation base used to determine the amount of the tax reduction.The law specifically targets construction, demolition, reconstruction, enlargement and transformation work (if applicable) and all expenses directly linked to these sites.In short, this covers heavy transformation work relating to elements of structure of the property.

Conversely, the repair, maintenance, improvement or renovation work which can be dissociated from refurbishment, rehabilitation or transformation of housing do not enter the field of reduction ofPinel tax.On the other hand, the investor can potentially deduct the amount of this work from his property income and thus benefit from the land deficit mechanism.

In summary, the cost price used to calculate the Pinel years reduction the old is determined as follows:

Cost price = acquisition price + transformation work - dissociable repair work

Namely: in tax matters a rule is essential, namely that the tax advantages cannot be combined for the same generating event.Thus, the work which gives entitlement to a tax reduction is not eligible for the deduction of the Foncie deficit, and vice versa.

The old pinel optimized to the land deficit

For landlord owners who already receive property income, invest in ancient Pinel also makes it possible to accumulate a tax reduction with the land deficit.The accumulation of the two tax advantages is based on the separation of the work mentioned above.The key for investors, a larger tax economy: the amount of income tax decreases thanks to the Pinel while taxable property income is erased, completely or partly depending on the situations, by the deduction of land loads.Better still, if all property income is "erased" (cases where the amount of charges is higher than the amount of gross property income), the land deficit decreases the overall taxable income within the limit of 10.700 euros per year.

Advantage of the association of these two devices, the buyer benefits from an immediate tax impact since he can deduct a share of the work for a maximum of two years before the delivery of the rehabilitated property.Once the latter is delivered, the Pinel tax reduction takes over.Disadvantage, the offer on this type of goods is much less abundant than in the new.

Example

In 2019 an investor acquired an old apartment (52.96 m²) to refurbish.He spent:

- 358.670 euros for the purchase price; - 28.694 euros of acquisition fees; - 192.657 euros for the work.

Total cost of the project: 580.021 euros

Among the work expenses, he distinguishes 154.125 euros in “Pinel” work and 38.532 euros of work deductible from property income.

Pinel tax economy:

To calculate the Pinel tax reduction, it must be retained a maximum amount of 300.Euros.However, the price per square meter of the apartment exceeds the other limit imposed by the device, at 5.500 euros/m².In our example, the investor must thus retain an amount of 291.280 euros (52.96 x 5.500).

The rental commitment runs over twelve years and gives the right to a tax reduction of 21%.The tax advantage thus reaches 61.169 euros (21% of 291.280 euros) over this period.

Time to finish the work, he will begin to benefit from 2022 (taxation of income from 2021).

Deduction of the land deficit:

The investor is imposed on the marginal tax tranche of 41% on the income tax scale.The amount he can deduct from his property income thus corresponds to: 38.532 x 56.5% (41% + 15.5% social security contributions) = 21.770 euros.

As soon as expenses were incurred in 2019, the deduction of the land deficit was able to start in 2020.

Data provided by Angelys Group