A look back at the main new tax measures in real estate, which are included in the 2014 Budget presented by the government on Wednesday, September 25.

The objective is clear: to achieve a deficit below 3% in 2015. Restoring public finances will require 80% savings and 20% revenue increases. And this year is no exception: property taxes will be partially tightened. Only partially, however, because the measures planned by the Ministry of Finance have both advantages and disadvantages for taxpayers – measures that still need to be approved by the National Assembly in the coming weeks.

Alongside the re-indexing of income tax brackets to inflation and the increase in the tax discount, the draft budget for 2014 presented today notably includes the power for departmental councils to raise transfer taxes. However, at the same time, it also confirms the easing of the capital gains tax regime for real estate.

The "good" news: Capital gains on real estate and VAT

Capital gains tax on real estate has been eased: a full exemption has been reduced from 30 years to 22 years of ownership of a property (second home), a measure that took effect on September 1st. It should be noted that the social security contributions (CSG and CRDS) remain unchanged, ultimately in the 30-year exemption. However, taxpayers will benefit from the exceptional 25% allowance until the end of next year. The cost of this measure is estimated at €260 million in 2013.

The VAT rate for construction and renovation work on social housing is also being reduced to 5%, which will cost the government €355 million this year. It should be noted that François Hollande announced a similar rate for insulation work in homes, as part of the plan to reduce final energy consumption by 50% by 2050.

The "bad" one: transfer taxes

Transfer taxes, often misleadingly called "notary fees," will be allowed to increase from 3.8% (currently) to 4.5% by the departmental councils in 2014 and 2015. They will then revert to 3.8% on March 1, 2016. "If all councils were to decide on the increase, it would represent an additional gain of €930 million for them in 2014," according to AFP. Transfer taxes currently represent 5.09% of the total purchase price of a property.