How do French capital gains rules apply to a rental property?

Reader Question: If we let out our second home will the letting period reduce the capital gains tax taper relief linked to length of ownership?

Capital gains tax is calculated on the gain: purchase price minus what you sell it for. 

You can add to the purchase price certain purchaser’s costs such as notaire fees (or otherwise a flat 7.5%) and expenses related to extensions and improvements (or a flat 15%). 

You can also deduct from the sale price certain seller’s expenses such as the cost of property check certificates.

Expenses for improvements etc. are only for major works, not for any minor maintenance or adaptations linked to letting the property.

Deductions are made to taxable gains for full years of ownership, accumulating after five full years, leading to complete exemption from CGT after 22 years and from social charges after 30 (the charges are at a reduced rate of 7.5% for people attached to the UK or an EU social security system).

With regard to the calculation of deductions, it does not matter if the property is used to let out, or is for your own use.

Note that if a property is a person’s own main home its sale is exempt from CGT, however, if such a home is occasionally let out, it is important to ensure the tax office does not classify it as a rental property, thus losing the exemption. 

It is the designated usage when it is sold that matters (unlike in the UK, where years in which a property was rented out reduce the benefit of ‘private residence relief’ and there is no longer a general ‘taper relief’ for length of ownership).

However, as you are talking about a second home (which does not benefit from this exemption) this issue does not apply in your case.