The IFI declaration is an annual tax obligation for taxpayers whose real estate assets exceed a certain tax threshold. Understanding how to file your tax return will help you avoid costly mistakes and meet your legal obligations. This guide will take you through every stage of your real estatewealth tax return.

What is the IFI declaration?

The IFI declaration is the tax document by which you declare your net taxable real estate assets to the tax authorities. Since 2018, the IFI has replaced the ISF as part of a major reform that has profoundly altered the taxation of wealth. Unlike the ISF, which taxed all wealth (financial assets, works of art, vehicles, jewelry and real estate), the IFI focuses exclusively on real estate assets. This reform has considerably reduced the number of taxpayers, from around 350,000 under the ISF to just 150,000 under the IFI. This declaration enables the tax authorities to calculate the tax due on your real estate assets.

The legal framework for this obligation is based on article 964 of the CGI and the following texts. You must declare all your real estate assets held directly or indirectly, both in France and abroad. The declaration is made each year at the same time as your tax return, and enables you to deduct debts relating to these properties.

Who has to file an IFI return?

You are liable for the IFI if your net taxable real estate assets exceed €1,300,000 on January 1 of the tax year. This threshold is assessed at the level of the tax household, including your spouse and minor children. The assets taken into account include all your real estate assets, whether built-up or unbuilt.

This applies to French tax residents for all their worldwide real estate holdings. Non-residents declare only their properties located in France. Shares in real estate companies and business assets under certain conditions are also included in the threshold calculation.

Failure to comply with this reporting obligation exposes the taxpayers concerned to tax reassessment and substantial penalties. It is therefore essential to check each year whether you have exceeded the 1.3 million euro threshold.

Calculating the 1.3 million euro threshold

To determine whether you exceed the threshold, you need to assess the market value of your property on January 1. The market value corresponds to the price that could be obtained in the event of a sale on the open market on that date. To estimate it, you can refer to local market prices per m², recent comparable transactions in your area, or call in a real estate expert for a professional appraisal.

You then deduct the debts relating to these assets to obtain the net taxable assets. If this amount exceeds €1,300,000, you must file an IFI tax return.

Concrete example: Let’s say you own a principal residence valued at €1,000,000. After applying the30% allowance reserved for principal residences, its taxable value is €700,000. You also own a second home worth €800,000. Your gross wealth is therefore €1,500,000. If you deduct your outstanding mortgages (€300,000), your net taxable assets come to €1,200,000. In this case, you remain below the €1,300,000 threshold and are not liable for the IFI.

How to declare your IFI

The IFI declaration is mainly made using form 2042-IFI, attached to your tax return. You must complete this form online in your personal space on the impots.gouv.fr website. Paper declarations are only possible if you are unable to file online.

Filing deadlines are aligned with those for income tax returns, and vary according to your situation. For 2024, paper returns must be filed by May 21. Online declarations follow a staggered schedule: up to May 23 for zone 1 (départements 01 to 19), up to May 30 for zone 2 (départements 20 to 54), and up to June 6 for zone 3 (départements 55 to 976). Respecting these deadlines is crucial to avoid late payment penalties.

For complex asset situations, particularly if you hold assets via corporate structures or abroad, you will also need to complete the additional form 2042-IFI-COT. Once your declaration has been validated, you can pay your IFI online directly from your personal space. The tax authorities also offer monthly payment options for spreading out the payment of your real estate wealth tax.

Documents to be prepared

Before completing your IFI tax return, you need to gather together all the supporting documents required to establish the value of your net taxable real estate assets. This meticulous preparation makes it easier to fill in your declaration accurately, and is an essential safeguard in the event of an IFI tax audit.

Essential documents include valuations of your properties, based on their market value on January 1. You should also gather together proof of deductible debts: amortization schedules for real estate loans, invoices for improvement or construction work, and property tax assessment notices. For indirect holdings, prepare certificates of ownership in real-estate companies, detailing the composition of their assets.

We recommend that you keep these documents for at least three years after filing. A well-organized file enables you to respond quickly to any request from the tax authorities, and to justify your declarations accurately.

How to calculate your IFI?

The IFI is calculated on the basis of a progressive scale applied to your net taxable assets. The tax is only payable on net taxable assets of 800,000 euros or more. The full 2024 scale is as follows:

IFI scale by bracket :

• 0 to €800,000: 0% rate
• From €800,000 to €1,300,000: 0.5% rate
• From €1,300,000 to €2,570,000: 0.7% rate
• From €2,570,000 to €5,000,000: 1% rate
• From €5,000,000 to €10,000,000: 1.25% rate
• Above €10,000,000: 1.5% rate

A discount mechanism applies to assets between €1,300,000 and €1,400,000, to reduce the threshold effect. This discount is calculated according to the following formula: €17,500 – (1.25% × net taxable wealth). This system enables a gradual transition to taxation.

To calculate your tax liability, you must first value each property at its actual market value. You then apply a 30% allowance to the principal residence. Debts incurred for the acquisition, construction or renovation of your property are deductible from the tax base.

Possible deductions

You can deduct debts existing on January 1 of the tax year, provided they have a direct and justified link to your taxable real estate assets. This link must be rigorously documented: property loans taken out for acquisition or construction, debts linked to improvement, renovation or extension work, and property taxes due on your buildings are all deductible debts. For properties generating rental income, debts relating to these investments are also deductible.

Please note, however, that certain debts are expressly excluded from the deduction. Current maintenance and management expenses, the previous year’s IFI, and bullet loans taken out to acquire assets not subject to IFI are not deductible. Loans taken out between members of the same tax household are also excluded from the deduction. In the case of shares in SCIs or real-estate companies, only the proportion of debt corresponding to your percentage holding is deductible from your tax base.

Documentary proof of these debts is of vital importance in the event of a tax audit. Keep all loan agreements, amortization schedules, work invoices and tax notices in a safe place. The assistance of professional accountancy services can prove invaluable in building up a convincing file and securing your declaration.

Assets to declare in your IFI return

You must declare all your real estate assets, whether freehold, bare ownership or usufruct. Built-up property includes your main residence, second homes and rental properties. Undeveloped land, shares in non-trading property companies (SCI) and shares in companies with a preponderance of real estate assets also fall within the scope of the declaration. If you are a French tax resident, your foreign assets must also be declared.

Some assets are fully or partially tax-exempt. Professional property used in your main business is exempt under strict conditions. Woodland and forests, as well as shares in forestry groups, benefit from partial exemptions of 75%.

Real estate held through companies

If you hold shares in real estate companies, you must declare the fraction of the value of the shares corresponding to the real estate assets. For companies with a majority of real estate assets, the value of the shares is determined in proportion to the net real estate assets. This valuation often requires the assistance of a specialized tax lawyer.

Real estate held through companies

If you own shares in real estate companies, you must declare the portion of the value of the shares corresponding to the real estate assets. A company is considered to have a preponderance of real estate assets when its real estate assets not allocated to a professional activity represent more than 50% of the total value of its assets. In this case, you must declare the value of your shares in proportion to this real estate fraction.

For SCI and similar companies, the value of shares is calculated according to the following formula: (gross assets – debts) x percentage of ownership. A discount for undivided ownership may be applied in certain situations, notably when several partners hold shares but cannot freely dispose of the assets. Holding companies may also be concerned if they hold stakes in companies with a preponderance of real estate assets, in which case the value of these stakes must be declared.

This complex valuation often requires the assistance of a specialist tax lawyer to accurately determine the declarable value and comply with the specific reporting obligations imposed on holders of shares in real estate companies.

Penalties for incorrect IFI declarations

Failure to file a tax return, or filing an inaccurate one, can result in substantial financial penalties. The tax authorities may apply a surcharge of 10% for late filing, rising to 40% in the event of an unanswered formal notice. Omissions or inaccuracies are subject to a surcharge of 40% of the duties evaded.

In the case of deliberate failure to comply or fraudulent maneuvers, the penalties can reach 80% of the recalled duties. The tax authorities have a three-year recovery period, extended to six years in the case of undeclared foreign assets. This extended period applies in particular to the taxation of non-residents holding assets in France. A tax audit may be initiated at any time during this period.

How to correct a declaration error

If you discover an error in your IFI declaration, you can carry out a spontaneous tax revision. This voluntary approach limits the penalties applicable. You must file an amended return, accompanied by an explanatory note detailing the nature of the error and its impact on the tax due.

In the event of a tax reassessment, you have a number of options for challenging the administration’s position. The contradictory procedure allows you to present your observations and negotiate with the auditor. If the disagreement persists, you can apply to the competent courts for tax relief.

Optimize your IFI tax return in total security

The IFI tax return requires careful attention to detail and an in-depth knowledge of tax rules. The financial stakes justify professional assistance to secure your tax return. A precise evaluation of your assets and a legal optimization of your wealth will help you reduce your tax burden in compliance with the law.

Don’t hesitate to consult a tax lawyer to help you with your tax returns. Personalized advice ensures that your tax return is compliant, and protects you against the risk of tax reassessment.

Special cases of declaration

When declaring your IFI, certain family situations require special attention. For married or civil-union couples, joint property assets must be declared jointly, even if you have opted for separate taxation of your income. This rule applies to all property held by both spouses or partners.

In the case of minor children, their real estate assets are automatically added to those of the parents exercising parental authority. However, there is an exception: if the child has sufficient income of his own to pay the tax, his assets can be declared separately.

In the case of joint ownership, it is generally the usufructuary who must declare the full value of the property in his or her IFI return, unless otherwise stipulated in the gift or inheritance that created the joint ownership. The bare-owner is then exempt from declaring the value of this specific asset.

Finally, cohabitants are considered as separate tax households for IFI purposes. Each partner must therefore declare his or her personal real estate assets, plus half the value of any property held jointly with the other partner. This situation differs markedly from that of married or civil union couples, who form a single tax household for IFI purposes.

These special cases must be carefully considered to avoid any risk of subsequent tax reassessment.