How to Calculate the Capital Gain on a Second Home?

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Whether acquired through a real estate purchase or an inheritance, a second home being resold can generate a capital gain subject to taxation. Winter Immobilier advises you on how to calculate your capital gain and estimate the flat tax rate it will be subject to: what expenses can be deducted to reduce the taxable capital gain on a second home? In which cases are you exempt from capital gains tax when reselling a second home?

Determining the taxable base of the capital gain on the resale of a second home

To find out the taxable base of your capital gain on the resale of your second home, you must first calculate the gross capital gain, from which various purchase and sale expenses can then be deducted. The gross capital gain consists of the difference between the purchase price of your second home and its resale price.

In the case of an inheritance, the acquisition price used to calculate this difference will be the estimate the notary based their work on when dividing the deceased’s estate. The calculation of the gross capital gain is very simple up to this point: if your second home was purchased for €200,000 (or estimated at €200,000 during the succession), and you resell it for €250,000, your gross capital gain is €50,000.

Reducing the capital gain on a second home by deducting expenses

Before being taxed, the amount of the capital gain can however be reduced, by adjusting the increase of the purchase price and the reduction of the selling price. The tax and social contribution rates are indeed applied to the net capital gain, meaning after deductions and allowances.

Increasing the acquisition price by a flat rate or actual costs

The taxable capital gain is reduced by increasing the acquisition price through the inclusion of renovation expenses. Two paths exist here, and they do not follow the same conditions. Actual expenses can be deducted on the strength of contractor invoices, regardless of how long the property has been held. The 15% flat-rate increase, on the other hand, is only available if you resell more than 5 years after acquisition. Several scenarios are possible:

• Renovation work has been carried out in the second home since its acquisition and this work was done by professionals, supported by invoices

• Work was carried out by the owner themselves

• The second home has not undergone any renovation work

In the last two cases, it will not be possible to deduct the actual costs of the renovation work from the capital gain, but it will instead be possible to apply a 15% flat-rate increase to the acquisition price, which has the effect of reducing the capital gain. In the first case, it will be necessary to evaluate whether it is more beneficial to increase the acquisition price by the actual amount of the expenses incurred for the work, or to apply the 15% flat-rate increase.

It is worth noting that the 15% flat-rate increase can be applied without having to prove that any renovation work actually took place, provided the 5-year condition is met. An owner who has had no work done at all is entitled to it on exactly the same basis as anyone else. This flat rate only applies to built properties, never to undeveloped land.

In addition to renovation expenses, acquisition costs and charges can also inflate the purchase price of the property, and thus reduce the taxable capital gain: here again, it is possible to deduct the actual costs (notary and registration fees), or to apply a 7.5% flat rate, which will be added to the 15% flat rate related to renovation expenses. In the case of a gross capital gain of €50,000 as mentioned previously, increasing the purchase price by 7.5% + 15%, meaning €45,000 more on a property acquired for €200,000, reduces the capital gain to €5,000!

Reducing the selling price by deducting expenses

On the other hand, the resale price of the property can also be legally modified in order to reduce the taxable capital gain. Conversely, it will be reduced by the costs associated with the sale, which will further narrow the gap with the purchase price. The expenses that can be deducted from the selling price when calculating the capital gain notably include agency fees, paid VAT, and the costs of compiling the technical diagnostic file (DPE, etc.).

Calculating the tax amount on the capital gain of your second home

Applying allowances

The net capital gain realized upon the sale of your second home is taxed under income tax and social contributions. But for each of these taxes, allowances are provided based on the holding period of the property. For income tax, the rate is 6% per year from the 6th to the 21st year, then 4% for the 22nd year alone. This is not a gradual progression, but a constant rate followed by a final installment. Full exemption from income tax is acquired beyond 22 years of ownership.

Social contributions follow a much slower timeline. The allowance stands at 1.65% per year from the 6th to the 21st year, 1.60% in the 22nd year, then rises to 9% per year from the 23rd to the 30th year. Full exemption only arrives after 30 years. Between 22 and 30 years of ownership, your capital gain therefore escapes income tax while remaining subject to social contributions, a gap that often catches sellers by surprise.

An exceptional allowance also exists, set out in Article 150 VE of the French General Tax Code, in municipalities where housing supply and demand are unbalanced. Nice is one of them. Its rate reaches 60%, rising to 75% within the perimeter of a major urban development scheme or a territorial revitalization agreement, and to 85% where the buyer commits to a share of social or intermediate housing.

Its real scope is often misunderstood, and deserves a closer look. This allowance requires the buyer to commit in the deed to building, to demolishing and then rebuilding, or to heavily renovating in order to produce new collective residential buildings, completed within 4 years. It therefore never applies to a standard resale to an individual who intends to live in the property, only to a sale to a developer. The scheme covers sale agreements signed up to 31 December 2027. If your property interests a developer, the tax saving carries real weight in the price negotiation.

Applying flat tax rates

The tax rates can be applied to the amount of the capital gain after calculating the allowances. With a flat rate of 17.2% for social contributions and a flat rate of 19% for income tax, the overall tax rate on the capital gain of your second home is 36.2%.

This 17.2% rate calls for a clarification for 2026. The social security financing act raised the CSG on investment income this year, pushing its overall taxation to 18.6%. Real estate capital gains are expressly excluded from this increase and remain at 17.2%. The overall 36.2% rate is therefore unchanged, contrary to what many publications suggest.

Applying the additional tax on large capital gains

Please note, in certain cases of high capital gains, a surtax is applied. This additional taxation concerns capital gains exceeding €50,000 after the application of allowances. Its rate varies from 2% to 6% depending on the amount of the capital gain.

How to be exempt from capital gains tax on a second home?

The capital gain realized upon the sale of a primary residence is exempt from income tax. In the context of the sale of a second home, however, only a few cases give rise to an exemption.

The first relates to the sale amount. The exemption applies when the sale price does not exceed €15,000, not when the gain itself stays under that threshold. The distinction changes everything. A property sold for €200,000 that generates only €3,000 in capital gain is not exempt. The threshold is assessed separately for each co-owner’s share, so a couple holding the property in equal shares each have €15,000 to work with, or €30,000 in total. With unequal shares, this reasoning no longer holds.

The second concerns the first sale of a home other than the primary residence. Contrary to a widespread belief, it does not depend on how long you have held the property being sold. Two conditions govern it instead. You must not have owned your primary residence at any point during the 4 years preceding the sale, and you must reinvest the proceeds into purchasing or building your primary residence within 24 months. The exemption then applies only to the portion of the price actually reinvested, and it can only be used once in a lifetime.

If your second home is held through a société civile immobilière, the calculation follows different rules, which we cover in detail in our article on SCI capital gains tax.

Selling from abroad, what changes for a non-resident

A significant proportion of second-home owners on the French Riviera live outside France. The tax rate on the capital gain does not change; it remains 19% for income tax, and the allowances for holding period apply in exactly the same way.

Social contributions, however, depend on your social security regime. If you are covered by a compulsory scheme in a country of the European Economic Area, in Switzerland or in the United Kingdom, and are not dependent on a French scheme, you are exempt from CSG and CRDS. Only the 7.5% solidarity levy remains due, compared with 17.2% for a resident of a third country. The gap approaches ten percentage points, and it can amount to thousands of euros on an ordinary sale in Nice.

Appointing an accredited tax representative is generally mandatory, with four waivers. You reside in a European Union or European Economic Area state bound to France by an administrative assistance agreement, the sale price does not exceed €150,000, the capital gain is already fully exempt through the holding-period allowance, or the property sold is your former primary residence in France.

A specific exemption also exists for the former primary residence of an expatriate, but it is narrower than often assumed. It is reserved for nationals of a European Union or European Economic Area state bound to France by an administrative assistance agreement, which excludes, for example, a French national settled in the United States, in Switzerland or in the United Kingdom. It is capped at €150,000 of net capital gain, applies to only one property per taxpayer, and requires having been tax resident in France continuously for at least 2 years at some point. The sale must take place by 31 December of the 10th year following your departure from France at the latest, unless you have retained free use of the property.

Winter Immobilier advises you on your future resale in Nice

Tax treatment is rarely decided in isolation; it follows first from the price at which you sell. An estimate of your property lets you gauge the real capital gain before committing, and our page on selling a property in Nice details the steps that follow.

Would you like more real estate resale advice and, more specifically, to discover the latest trends in real estate in Nice? Feel free to visit our real estate agency in Nice Gambetta or get in touch directly with one of our advisors by phone!