What is the LMP status?
The Professional Furnished Property Lessor (LMP) status is a tax regime applicable to individuals whose furnished rental activity is significant enough to be considered professional by the tax authorities.
Furnished rental consists of providing a property equipped with the furniture necessary for normal occupation by the tenant. When certain conditions are met, the owner can benefit from LMP status, which offers specific tax advantages compared to unfurnished rental or the Non-Professional Furnished Property Lessor (LMNP) status.
LMP is often used as part of a wealth management strategy aimed at developing a rental property portfolio while benefiting from a favorable tax framework.
What are the conditions for being considered an LMP?
To benefit from the Professional Furnished Property Lessor status, several conditions must be met.
Annual revenue from furnished rentals must exceed €23,000 per year and be higher than the tax household’s other professional income, such as salaries, industrial and commercial profits, agricultural profits, or non-commercial profits.
When these criteria are met, the furnished rental activity is considered to be carried out on a professional basis and falls under the LMP regime.
If these conditions are not met, the lessor generally falls under the LMNP regime.
How does LMP taxation work?
Income from the activity is taxed under the category of industrial and commercial profits (BIC).
The lessor can opt for the actual cost regime, which allows for the deduction of numerous expenses related to the operation of the property: mortgage interest, management fees, insurance, taxes, maintenance work, or even accounting depreciation of the property and furniture.
Depreciation is one of the main advantages of the regime, as it often allows for a significant reduction in taxable profit without generating a cash outflow.
This mechanism can contribute to significantly reducing taxation on rental income for several years.
What are the advantages of LMP status?
LMP status offers several wealth management and tax advantages.
One of the best known concerns the treatment of deficits. Under certain conditions, deficits generated by the activity can be offset against the tax household’s total income, which can reduce income tax.
The regime also offers specific treatment for capital gains upon the resale of properties. Depending on the holding period and the level of revenue, certain exemptions may apply.
Furthermore, properties operated as part of an LMP activity may, in certain situations, benefit from a favorable regime regarding inheritance and gift tax.
These characteristics make LMP a tool often studied by real estate investors with a significant rental portfolio.
What are the disadvantages and constraints of LMP?
The status also involves several obligations.
Maintaining accounts is generally necessary when the actual cost regime is applied. This administrative management may require the services of a chartered accountant.
Income from the activity may also be subject to social security contributions in certain situations, which is a major difference from the LMNP regime.
Furthermore, LMP status is reserved for investors whose rental activity reaches a significant level. It is therefore not suitable for owners with only a small amount of incidental rental income.
What is the difference between LMP and LMNP?
The main difference lies in the professional or non-professional nature of the activity.
LMNP concerns investors whose furnished rental income remains below the thresholds defined by law or does not constitute their main source of professional income. LMP, conversely, applies when the activity takes on a larger economic dimension.
The tax treatment of deficits, capital gains, and social security contributions also differs between the two regimes.
The choice or transition from one regime to another must be carefully analyzed to evaluate its tax, social, and wealth management consequences.
Who is LMP status for?
The Professional Furnished Property Lessor status is primarily intended for investors with a developed rental property portfolio generating significant income through furnished rentals.
It can be an interesting lever for optimizing the taxation of rental income, preparing for the transfer of assets, or developing a long-term real estate activity.
Given its technical nature and its tax and social implications, consulting a wealth management professional or a chartered accountant is often recommended before opting for this regime.
