Real-estate loan interest: what is deductible in 2026

Quick answer. Interest on a rental real-estate loan is deductible, but the rule depends on the regime. Under property income at the actual regime, interest and loan fees are deducted from rents; the deficit linked to interest only offsets property income, carried over ten years. In an SCI at corporate tax, interest is a deductible financial charge. Under the micro regime, no charge or interest is deducted. For your main residence, interest is not deductible.

Financing a rental property with a loan has a real tax benefit, but it is won or lost depending on the chosen tax regime. Loan interest is one of the heaviest charges of the early years, and its treatment is anything but uniform. Let us sort out property income at the actual regime, an SCI at corporate tax and the micro regime, including the 2026 rules on the property deficit.

For unfurnished rental taxed at the actual regime, loan interest is deducted from the rents received (Tax Code art. 31).

The deduction is not limited to interest itself. Costs incidental to the loan are also deductible: bank arrangement fees, guarantee costs such as a mortgage or a surety, and borrower insurance premiums linked to the loan. These costs add to the other deductible charges, such as the property tax, maintenance and repair works or non-recoverable co-ownership charges.

The actual regime becomes worthwhile as soon as your real charges exceed the flat allowance of the micro regime, which is almost always the case in the early years of a loan. For a landlord, the rigorous tracking of these charges is part of the accounting obligations of the owner in rental management.

When charges exceed rents, you create a property deficit, and the tax rules separate interest from the rest.

The property deficit excluding interest offsets your overall income up to 10,700 euros per year, which directly reduces your income tax. The fraction of the deficit coming from loan interest, however, never offsets overall income: it can only offset your property income, present or future, and remains carried forward for ten years.

The deficit above 10,700 euros is also carried forward against property income for the following ten years. This mechanism explains why interest, very high at the start of a loan, does not immediately produce an overall income-tax gain: it sits in a carry-forward that clears over time as rents come in.

A temporary scheme doubles the cap of offset against overall income for energy renovation works.

The cap rises from 10,700 to 21,400 euros per year when the deficit results from works that take the dwelling out of the energy-sieve status, moving it from class E, F or G to at least class D. This increase, introduced by the amended finance law for 2022, was extended by the finance law for 2026 for expenses paid up to 31 December 2027. It requires an energy performance certificate before and after the works to prove the class jump.

In an SCI subject to corporate tax, the treatment changes logic.

Loan interest becomes a financial charge deductible from taxable profit, like in any company at corporate tax. This deduction adds to the depreciation of the building, which strongly reduces current tax during the repayment phase. Profit is then taxed at corporate tax of 15% up to 42,500 euros, then 25% beyond.

Two limits deserve attention. Interest paid on a partner's current account is only deductible within a rate set by law. And a mechanism capping net financial charges exists above 3 million euros of charges, a threshold that small SCIs rarely reach. The choice of corporate tax remains decisive, because it increases the capital gain on resale, a subject developed in our article SCI at corporate tax or income tax.

Two situations allow no deduction of interest, and this is a frequent source of error.

Under the micro regime, available when your gross property income does not exceed 15,000 euros per year, you benefit from a flat allowance of 30%, meant to cover all your charges. You therefore deduct neither interest nor real costs. As soon as your interest and charges exceed 30% of the rents, opting for the actual regime becomes more favourable.

For the purchase of your main residence, loan interest is not deductible: the tax credit that once existed has been abolished. Only assets that produce taxable income, that is rental, give the right to deduct interest. The structuring of a rental estate through a company is covered in our property SAS guide.

The tax benefit of a real-estate loan is real, but it only fully appears under the actual regime or corporate tax. The micro-regime reflex, chosen for its simplicity, often loses the interest deduction at the very moment when interest is highest.

The real arbitrage is between property income at the actual regime and an SCI at corporate tax. The actual regime keeps the individual capital gains regime and its holding-period allowance, with a property deficit that lightens overall tax excluding interest. Corporate tax maximises the deduction during ownership, interest and depreciation included, but burdens the exit. As often in real estate, the deductibility of interest is not decided alone: it is assessed together with the overall tax regime and the holding horizon.

An investor had declared his first rents under the micro regime for simplicity, while repaying a recent loan. His interest and property tax far exceeded 30% of the rents, so the flat allowance made him lose a significant deduction. Switching to the actual regime turned a taxed income into a property deficit: the part excluding interest reduced his overall income within the annual cap, and the part linked to interest was carried forward against his future property income. The tax gain financed a sizeable share of his first monthly payments.