IFI: guide to the French real estate wealth tax

The IFI (Impot sur la Fortune Immobiliere, or real estate wealth tax) applies to taxpayers whose net real estate portfolio exceeds 1.3 million euros on January 1. In 2026, the progressive tax brackets range from 0.50% to 1.50%, with a 30% allowance on the primary residence. Several strategies can optimise the taxable base, particularly dismemberment and the SCI structure.

Introduction

Since replacing the ISF (solidarity wealth tax) in 2018, the IFI targets exclusively real estate assets. For Parisian investors whose properties often exceed the 1.3 million euro threshold, this tax represents a significant annual charge that directly influences acquisition and wealth structuring decisions.

In 2026, with a median price of 9,900 euros/sqm in Paris and more than 12,000 euros/sqm in the central arrondissements, a 140 sqm apartment is enough to cross the threshold. This guide presents how the IFI works, which assets are concerned and the most common legal optimisation strategies. For detailed calculations and practical threshold examples, a complementary article will be published soon.

Table of contents

• How does the IFI work and what are the 2026 brackets?
• Which assets are taxable and which are exempt?
• How does the 30% allowance on the primary residence work?
• Which debts can you deduct from the IFI tax base?
• How can you legally reduce your IFI?
• How does a property hunter come into the IFI equation?

How does the IFI work and what are the 2026 brackets?

The IFI is an annual tax declared at the same time as income tax. It is levied on the net value of real estate assets on January 1. The trigger threshold is set at 1.3 million euros, but the brackets start at 800,000 euros according to the following structure:

• Up to 800,000 euros: 0%
• From 800,000 euros to 1,300,000 euros: 0.50%
• From 1,300,000 euros to 2,570,000 euros: 0.70%
• From 2,570,000 euros to 5,000,000 euros: 1.00%
• From 5,000,000 euros to 10,000,000 euros: 1.25%
• Above 10,000,000 euros: 1.50%

A tapering mechanism applies to portfolios between 1.3 million euros and 1.4 million euros, softening the threshold effect. In practice, a net real estate portfolio of 2 million euros generates an IFI of 7,400 euros per year. At 3 million euros, the IFI reaches 15,690 euros.

These amounts, relative to the portfolio value, represent an annual holding cost of 0.37% at 2 million euros and 0.52% at 3 million euros, a parameter that our property hunters systematically factor into return analyses for our investor clients.

Which assets are taxable and which are exempt?

The IFI tax base includes all real estate rights held directly or indirectly on January 1:

Taxable assets: primary residence (after allowance), secondary residences, rental investments, land, SCI shares, SCPI and OPCI shares for their real estate fraction, properties held through life insurance (real estate unit-linked policies).

Exempt assets: properties used for the taxpayer’s main professional activity, woodlands and forests (subject to conditions, with 75% partial exemption), forestry and wine-growing group shares, rural properties under long-term leases (partial exemption).

A crucial point for Parisian investors: assets held in bare ownership are excluded from the bare owner’s IFI tax base. It is the usufructuary who declares the full ownership value. This rule forms the foundation of the dismemberment strategies we detail in our bare ownership guide.

Commercial and professional premises that you hold as investments are, however, taxable. If you are considering purchasing commercial premises in Paris, the IFI impact must be integrated into the return calculation.

How does the 30% allowance on the primary residence work?

It applies automatically, with no formality, to the market value of the property you occupy as your primary residence on January 1: a home valued at 1.5 million euros enters the tax base for only 1,050,000 euros. It is the most significant tax advantage for Parisian property owners subject to the IFI.

For a primary residence apartment valued at 1.5 million euros, only 1,050,000 euros enter the IFI tax base. The tax saving amounts to approximately 3,150 euros per year on this single reduction alone.

Conditions to meet: the property must be your effective primary residence, meaning the place where you habitually and permanently reside. A pied-a-terre occupied a few weeks per year cannot benefit from this allowance, which is why it is crucial to properly define your primary residence from a tax perspective.

In the case of ownership through an SCI, the 30% allowance is maintained if you actually occupy the property as your primary residence. However, case law remains vigilant regarding the interposition of companies, and the tax authority may challenge the application of the allowance if the SCI ownership is not justified by a reason other than tax optimisation.

Which debts can you deduct from the IFI tax base?

The IFI is levied on net real estate assets, meaning that debts related to your real estate properties are deducted from the taxable base. This mechanism is essential for buyers who finance through borrowing.

Deductible items include: acquisition loans, renovation loans, bridging loans (our bridging loan guide details this mechanism), security deposits received from tenants, property tax due on January 1, and debts related to maintenance or improvement works.

Important cap: since 2018, debts are only partially deductible for portfolios exceeding 5 million euros. Beyond this threshold, the deductible debt is halved for the portion exceeding 5 million euros. This rule aims to limit artificial leveraging strategies.

In practice, an investor who purchases a property for 1 million euros with a 700,000 euro loan only declares 300,000 euros for that property under the IFI. The leverage effect of a mortgage thus mechanically reduces the tax base, an additional argument in favour of debt financing, even for buyers with sufficient funds.

How can you legally reduce your IFI?

Four legal levers: property dismemberment, the SCI subject to corporate tax, bare ownership investment and temporary usufruct donation. All of them reduce the IFI tax base without selling your assets; they fall under specialised wealth management advice, but understanding them directly influences real estate acquisition choices.

Property dismemberment is the most effective strategy. By granting temporary usufruct of a rental property to your adult children or to an organisation, you remove the property’s value from your IFI tax base for the duration of the dismemberment. The discount varies from 30 to 50% depending on the duration and the donor’s age. We detail this approach in our bare ownership guide.

The SCI subject to corporate tax allows real estate assets to be housed in a structure whose shares are valued based on net assets, taking into account debt and latent taxation. This valuation discount can reach 10 to 15% compared to direct market value. Our SCI guide explores the advantages and constraints of this structure.

Bare ownership investment consists of acquiring a discounted property (30 to 50% depending on the dismemberment period) that generates no IFI during the usufruct period granted to a social or institutional landlord. At the end of the dismemberment, you recover full ownership without additional taxation.

Temporary usufruct donation to an adult child or organisation allows you to remove the property from your IFI portfolio while retaining bare ownership. The usufruct must be genuine (occupation or rent collection by the donee).

How does a property hunter come into the IFI equation?

IFI optimisation is not limited to wealth structuring: it begins during the property search phase. The acquisition amount, its financing method and its legal nature (full ownership, dismemberment, SCI) determine the tax impact over several decades.

Our property hunters integrate the IFI dimension into their support for clients concerned by this tax. When a buyer’s real estate portfolio is close to the 1.3 million euro threshold, the choice between purchasing in full ownership or bare ownership can represent an annual saving of several thousand euros.

For international clients, the IFI question comes with additional complexity related to bilateral tax treaties. Our guide to buying in Paris as a foreigner addresses the specificities of real estate taxation for non-residents.

The support of a property hunter in Paris does not replace the advice of a tax specialist or notaire, but it ensures that wealth parameters are taken into account from the asset selection stage. This is an approach we have championed since the founding of Home Select in 2011.

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Does your property portfolio approach or exceed the IFI threshold? Our property hunters help you identify assets whose acquisition structure optimises your tax burden. Contact Home Select to discuss.