Does equity release lower IFI wealth tax in France?

Reader question: If I take an equity release loan (prêt viager hypotécaire) can I offset this against my main home’s value for IFI property wealth tax? Also, is a property rented out long-term to someone else exempt from the IFI calculation?

Eligibility to pay IFI wealth tax for people who live in France requires worldwide wealth of €1.3million and there is a 30% deduction allowed against the main home in France. If triggered, it is then assessed on your net wealth at bands starting from €800,000.

The good news is that the amount of an equity release loan (repayable from your estate after you die) would be considered a deductible liability against your assessable estate for this tax.

So, for some people, this loan can have a double benefit of giving them liquid assets to spend or invest as they wish and reducing the amount of their IFI.

As for property rented out to other people long-term, this does not necessarily exempt them from being taken into account for IFI.

One situation where exemption does apply is people with the status of loueur en meublé professionnel (professional furnished rental landlord). 

This has quite demanding criteria, including making at least €23,000/year from the activity and it being more than 50% of the household income from work.

Subject to certain rules, business premises can also be exempt, mainly where the taxpayer or someone in the household uses it for their work. 

It is also important to note that the foreign assets of people who have moved to France are exempt from IFI until the end of the fifth calendar year after the year they became fiscally resident. This means that the foreign assets of people who moved after January 1, 2021, are excempt.

Click here to read or purchase our help guide on France's IFI property wealth tax