French Wealth Tax (IFI): Who Pays and How to Calculate Your Liability

Understanding the Impôt sur la Fortune Immobilière (IFI)

The Impôt sur la Fortune Immobilière (IFI), France’s wealth tax on real estate, is an annual tax levied on individuals whose net taxable real estate assets exceed €1.3 million as of 1 January each year. It replaced the old Impôt de Solidarité sur la Fortune (ISF) in 2018, shifting the focus exclusively to real estate rather than global wealth. For anyone seriously considering a move to France, understanding the IFI is crucial, as it can significantly shape your financial planning and property strategy. French Connections HCB helps 30–40 people relocate to France every month, and we frequently guide clients through these tax considerations as part of the move.

The IFI is a progressive tax, meaning the rate increases with the value of your taxable assets. It applies to both French residents and non-residents, though the scope of taxable assets differs. This article breaks down who is liable, how to calculate your IFI, and practical steps for managing it.

Who is liable for French wealth tax (IFI)?

If you are moving to France, start with the rule that matters most for new arrivals. Under Article 964 of the French tax code, people who become French tax residents after at least five years living abroad are taxable on their French real estate only, until 31 December of the fifth year following the year they arrive. During that window, property you own outside France is simply out of scope, no matter its value. For many expats with a home still held in the US or UK, this rule changes the IFI answer entirely for the first five years. Only after the window closes does worldwide property come into the calculation.

Beyond that, liability depends on your tax residency status as of 1 January of the tax year, with the €1.3 million threshold applying to whatever is in scope for you.

French tax residents

Once you are a French tax resident (and past the new-resident window above), you are liable for IFI on all your real estate assets located anywhere in the world, provided your total net real estate wealth exceeds the €1.3 million threshold. This global scope is a key consideration for anyone with significant property holdings outside France. Your tax residency is generally determined by where your household is, where your main economic interests lie, or where your main place of stay is (often approximated by the 183-day rule). We cover the residency tests in more detail in our guide to your first French tax return.

Non-French tax residents

For non-residents, the IFI applies only to real estate located in France. If you own property in France but are not a French tax resident, only the value of your French properties counts towards the €1.3 million threshold and the tax calculation. This distinction is vital for those who own holiday homes or investment properties in France but live elsewhere.

What assets are included in the IFI calculation?

The IFI specifically targets real estate assets and rights, so other forms of wealth, such as financial investments, movable goods and professional assets, are generally excluded. The assets included are primarily:

• Built properties: houses, apartments and other buildings, whether residential, commercial or professional.
• Unbuilt properties: land, agricultural land and forests.
• Shares in real estate companies: if you own shares in companies (French or foreign) that hold real estate, the portion of your shares representing the underlying real estate is subject to IFI. This includes SCIs (Sociétés Civiles Immobilières) and other property-holding entities.

Certain assets are partially or fully exempt. Professional premises used for your main business activity are typically exempt, and certain agricultural and forestry assets benefit from partial exemptions.

How to calculate your IFI liability

Calculating your IFI involves several steps: identifying your taxable assets, valuing them, deducting eligible debts, and applying the progressive scale. French Connections HCB can connect you with English-speaking tax advisors in France who specialise in these calculations.

Step 1: determine your net taxable real estate assets

List all your real estate assets within the IFI scope (remembering the five-year rule if you are a new resident). For each property, determine its market value as of 1 January of the tax year: the price at which it could realistically be sold under normal market conditions.

For your main residence, a 30% allowance is applied to its market value. So if your main residence is valued at €1,000,000, only €700,000 counts towards your taxable assets.

Step 2: deduct eligible debts

From the gross value of your taxable assets, you can deduct certain debts related to those properties:

• outstanding mortgage loans used to acquire, renovate or improve the property;
• loans for the construction of new properties;
• property taxes such as the taxe foncière that are due as of 1 January.

Only debts directly related to the taxable real estate can be deducted. Personal loans and other non-property debts are not deductible.

Step 3: apply the IFI tax scale

The IFI is a progressive tax, applied to net taxable real estate assets exceeding €800,000, even though the threshold for liability is €1.3 million. If your net taxable assets are €1.4 million, for example, the tax is calculated on the portion above €800,000. The current rates are:

Source: Direction Générale des Finances Publiques

Example calculation:

Say your net taxable real estate assets (after deductions and the 30% main-residence allowance) come to €2,000,000.

• Up to €800,000: no tax
• From €800,000 to €1,300,000 (€500,000 at 0.50%): €2,500
• From €1,300,000 to €2,000,000 (€700,000 at 0.70%): €4,900
• Total IFI due: €7,400

One refinement worth knowing about: if your net taxable assets fall between €1.3 million and €1.4 million, a discount (décote) softens your entry into the tax. The discount equals €17,500 minus 1.25% of your net taxable value. At €1,350,000, for instance, the IFI otherwise due is reduced by €625. For a personalised assessment of your liability, it’s always best to consult a qualified tax professional; we can introduce you to one as part of our relocation support.

Practical tips for managing your IFI

Tip 1: accurate valuation is key

Ensure your property valuations are accurate and justifiable. Overvaluing your assets leads to unnecessary tax, while undervaluing can lead to penalties. Obtain professional valuations where necessary, especially for unique or high-value properties, and keep records of comparable sales in your area. The French tax authorities can challenge your valuations, so robust evidence matters.

Tip 2: review your debts annually

Regularly review and document all eligible debts related to your properties. As mortgage balances decrease, so do your deductible amounts. Keep loan agreements and repayment schedules readily available. This meticulous record-keeping can make a real difference to your net taxable base.

Tip 3: consider property ownership structures

The way you hold property can affect your IFI. Owning property through certain types of company may alter the calculation, though this is a complex area requiring expert advice. Before making any changes, consult a French tax advisor about the implications for IFI and other taxes. This is particularly relevant for those with significant portfolios or international structures. Our guide to the cost of living in France also covers the broader picture of property-related expenses.

Tip 4: understand double taxation treaties

If you are a French tax resident with real estate abroad (and past the five-year window), check whether a double taxation treaty exists between France and the country where your assets are located. These treaties can prevent you from being taxed twice on the same assets. France has an extensive treaty network, and we explain how it works in our guide to avoiding double taxation.

Key takeaway: the IFI threshold is €1.3 million, but the tax calculation starts from €800,000. New residents pay only on French property for their first five years. Accurate valuation and diligent debt documentation are crucial for keeping your liability correct.

Reporting and payment of IFI

The IFI is declared annually as part of your income tax return, using a specific annex (Form 2042-IFI). Filing deadlines vary by department but generally fall between May and June. The payment itself is then due in mid-September.

Penalties apply for late filing or incorrect declarations, so seek professional assistance if you are unsure. French Connections HCB can recommend trusted tax professionals to handle your IFI declaration and make sure every deadline is met.

The impact of IFI on expats considering France

For expats weighing up a move to France, the IFI is a significant consideration for those with substantial property portfolios, and not just for the tax itself: the annual valuation and declaration work is a real administrative commitment. Understanding the tax before you move, especially the five-year new-resident rule, helps you make informed decisions about your property strategy, whether that means holding, selling or restructuring overseas assets, or simply budgeting for the annual expense.

Many expats find the French tax system, IFI included, more involved than what they are used to. This is where expert guidance becomes invaluable, alongside the practical strands of the move such as the French healthcare system.

Key takeaways

1. The IFI is an annual French wealth tax on real estate assets exceeding €1.3 million, which replaced the ISF in 2018.
2. New residents who spent the previous five years abroad pay IFI only on French property until 31 December of the fifth year after arrival (Article 964 of the tax code).
3. After that window, French tax residents are liable on worldwide real estate, while non-residents are only ever taxed on French property.
4. The 30% allowance on your main residence significantly reduces its taxable value.
5. Eligible debts, such as mortgages for acquisition or renovation, are deducted from the gross value of your assets.
6. The IFI is progressive, with rates from 0.50% to 1.50% applied above €800,000, and a décote softens the bill between €1.3 million and €1.4 million.
7. The IFI is declared with your income tax return in May-June and paid in mid-September; accurate valuations and documented debts keep you penalty-free.

If property is part of your France plans, it pays to understand the tax picture before you commit. Book a consultation and we’ll help you think it through with the right specialists.