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Living in a shared accommodation can be an excellent option for saving money, but how do you manage taxes in this case? Discover the rules to follow for shared living and taxes in France.
Fiscal rules for shared living in France
If you’re considering entering a shared living arrangement in France, it’s essential to understand the fiscal rules that apply to your situation. There are no specific laws for shared living in terms of taxation, but whether it’s a classic shared living, main residence, furnished accommodation, or coliving, here are the key points to know:
- Declare your income
As a roommate, you must individually declare your income and your share of the rent on your income tax return. The general rules of the General Tax Code (CGI) apply here.
- Declare your expenses
If they are not already included in your rent amount (as is the case with coliving where everything is included), you must declare certain expenses, such as the housing tax. These can be deducted from your taxable income if you meet the eligibility conditions. In a classic shared living arrangement, the public finance department (taxes) sends the amount of the housing tax to the owner/landlord. The roommates then share it among themselves, proportionate to their share of the rent.
- Tax sharing
The sharing of taxes depends on the type of shared living and your personal situation. For shared living in a main residence, you may be exempt from housing tax if you have modest income. If you live in a furnished accommodation, the housing tax is replaced by the territorial economic contribution (CET), paid by the owner, who can pass it on to the rents. Finally, in coliving, which falls under the service residence sector, specific tax rules apply, particularly in terms of VAT and housing tax.
Responsibilities of roommates
Being a roommate is not just about living with several people under the same roof. You must face certain essential tax obligations, and be careful if you were to forget them:
- Income tax declaration
Each roommate must declare their share of the rent received by the owner and the deductible expenses (if applicable).
- Expense calculator
It is essential to distribute expenses fairly among roommates, according to each person’s share of the rent.
- Tax formula choosing
Depending on your situation (co-owner roommate or non co-owner roommate), you may be subject to different tax formulas. Indeed, Article 1751 of the Civil Code explains that someone is considered a “co-owner roommate” if they come into shared accommodation after being in a relationship with, marrying, or entering into a civil partnership with an already-present roommate. Being on the same lease contract, they are united and subject to the same rules. Both have to pay their housing/council tax (which is expected to phase out by the end of 2023), and thus, their income tax.
- The case of rent-free shared living
The owner must declare the benefits in kind received (childcare, pet care, cleaning, gardening, DIY, etc.), and tenants must meet certain conditions to be exempt from housing tax.
Fiscal advantages and disadvantages of shared living
Shared living has two significant financial and tax advantages:
- Expense sharing
Although it is not directly a tax advantage, sharing expenses in shared living (such as housing tax) is a definite advantage for roommates. It lightens the financial burden for everyone.
- Tax deduction for work
This point mainly concerns owners and landlords but is interesting for roommates. They can benefit from tax advantages when they carry out improvement, renovation, or maintenance work in the shared rental accommodation. If roommates undertake work at their expense, it also affects them, and they can obtain a tax deduction.
- Tax allowance
If you rent an unfurnished shared living, you can benefit from a tax allowance depending on your income. You will, of course, need to report it in your tax return and the various administrative documents you fill out.
While it has advantages, it also has some disadvantages:
- Risk of tax adjustment
If the income and expenses are not correctly declared by the roommates or the landlord, they may be exposed to a tax adjustment. To avoid this, it is necessary to carefully check one’s tax return, declare being in shared living, not commit fraud to receive housing assistance, or not lie about any other aspect.
- Tax on capital gains in real estate
This point does not concern roommates either (unless they are co-owners of the property in question) but rather the owners who sell a property and realize a capital gain. A capital gain is the increase in the value of the property between the time of purchase and the time of sale. If the owner sells the shared living property, converts it into a primary residence, or if the property is passed on to the heirs following the owner’s death, they may be subject to a tax on the capital gain realized.
How to fill out your tax return when living in a shared accommodation?
The type of lease signed between the roommates and the landlord has an impact on how the tax return should be filled out. Here’s how to proceed for each type of lease in shared living and coliving.
- Shared living with a single lease for all roommates
In the case of a single lease signed by all roommates, the steps to fill out the tax return are as follows:
- Identification of roommates: Include the names of all roommates living in the property on January 1st of the current year on your income tax return.
- Distribution of rent: The landlord must declare the portion of rent received from each roommate, based on the occupied area, distribution of expenses, or an agreement between the roommates.
- Declaration of deductible expenses: If there are deductible expenses related to shared living (for example, work eligible for a tax deduction), they must be mentioned in the income tax return.
- Shared living with individual leases
When there is an individual lease for each roommate, the tax return declaration procedure is slightly different:
- Identification of roommates: Each roommate should only mention their own name on their income tax return.
- Declaration of rent: Each roommate declares their individual rent received by the landlord, without worrying about the distribution among other roommates.
- Declaration of deductible expenses: If there are deductible expenses related to shared living, each roommate must declare their corresponding share in their income tax return.
- Coliving with individual leases
Coliving is a form of shared living where each occupant mainly has an individual lease. The steps to fill out the tax return are similar to those of a shared living situation with individual leases:
- Identification of roommates: As with shared living with individual leases, only include your own name on your income tax return.
- Declaration of rent: Declare your individual rent received by the property owner.
- Declaration of deductible expenses: If there are deductible expenses related to coliving, declare your corresponding share in your income tax return.
By following these instructions based on the type of lease and the shared living or coliving situation, you can properly complete your tax return and avoid mistakes.
Who pays the housing tax in a shared living situation?
The housing tax is a local tax that must be paid by the occupants of a dwelling, whether they are tenants or property owners. Here’s how the housing tax is handled in shared living and coliving situations.
- In a shared living
In shared living situations, roommates are generally considered cohabitants and must pay the housing tax jointly. The procedure is as follows:
- Receipt of the tax notice: The tax notice is usually sent to all roommates, mentioning their first and last names. Each roommate must verify that their name is included on the notice.
- Distribution of the tax amount: Roommates must distribute the housing tax amount among themselves. This distribution can be done in equal shares or based on specific criteria (occupied area, income, etc.).
- Payment of the tax: Each roommate is required to pay their share of the housing/council tax. Payments can be made online, via automatic withdrawal, or by check, as per the instructions provided on the tax notice. At Colivys, any tenants who move in from January 1st of the current year are responsible for making these housing/council tax payments.
It is important to note that roommates are jointly and severally responsible for the payment of the housing tax, through a solidarity clause. If one of them does not pay their share, the other roommates may be held responsible for settling it.
- In coliving
In a coliving situation, the circumstances are different, as each occupant typically has an individual lease. Here’s how the housing tax is handled in this case:
- Receipt of the tax notice: Each occupant receives an individual tax notice, mentioning their first and last name. In cases where the coliving housing management organization is the main tenant, the tax notice is then sent to them.
- Payment of the tax: Each occupant must pay their own housing tax, following the instructions on their tax notice.
In coliving, each occupant is responsible for the payment of their housing tax, without any solidarity link with the other occupants. This arrangement simplifies the payment process and avoids complications related to the distribution of the tax among roommates.
Please note that the housing tax is set to be phased out. This exemption will apply to all French households by the end of 2023.
The case of coliving and taxes
Coliving and shared living are two concepts that may seem similar at first glance, but they actually have notable differences in terms of taxes. In this article, we will help you see more clearly by addressing the nuances between these two lifestyles and their tax implications.
In shared living, each roommate is responsible for their share of rent and expenses. Each roommate declares their income individually, without considering the other roommates. Housing assistance, such as APL (Personalized Housing Assistance), is also calculated individually based on each person’s situation.
In coliving, the tax situation differs slightly in terms of income tax. Some specific features can be observed, especially if you are a fan of remote work and like to work from the coworking spaces provided. You can deduct part of your rental expenses as professional expenses, under certain conditions.
As for housing assistance, the situation is similar to that of shared living: it is calculated based on the individual situation of each resident.
Coliving can offer tax benefits for those who work from the communal spaces of the complex. Thus, it is essential to thoroughly study the specifics of each lifestyle to choose the one that best suits your needs and tax situation.
Whether it is in shared living or in coliving, community life in France involves respecting certain tax rules depending on the situation of each roommate and the type of accommodation chosen. It is essential to properly declare income and expenses related to shared living/coliving, choose the appropriate tax formula, and manage the payment of the housing tax correctly. To avoid mistakes and manage taxes effectively, here are some tips we recommend you follow diligently:
- Communicate with your roommates or colivers
Discuss the tax aspects together and make sure everyone is on the same page regarding each person’s responsibilities and expectations, especially if you share the same lease.
- Clarify the terms of the lease
Whether you are in shared living or coliving, it is crucial to understand the terms of your rental agreement and ensure that the tax aspects are clearly defined.
- Learn about housing assistance
Research the different housing assistance options available and check if you are eligible. These aids can significantly reduce the cost of rent and make managing your budget easier.
- Organize your documents
Keep track of all documents related to your housing (lease, rent receipts, bills, etc.) and taxes. This will make your life easier when filing your income tax return or in case of a tax audit. Don’t forget invoices for work done in the housing if they were at your expense. Check their eligibility for tax deductions before declaring them.
- Respect deadlines
Make sure to meet the deadlines for housing tax payments and income tax returns. Delays can result in penalties and unnecessary complications.
- Ask for help
Because nobody knows everything, don’t hesitate to ask for help from a friend or consult an accountant/tax advisor for personalized advice tailored to your situation.
By following these recommendations, you can effectively manage the tax aspects of your shared living situation and fully benefit from its advantages.
