Attention landlords: how IRS tax discounts work, which can drop from 28% to 10%

In an attempt to boost the rental market, the government is strongly committed to reducing landlords' income tax rates, proposing to lower them from 28% to 26%, 23%, 14%, and 10%, depending on the length of the contract. We show you several scenarios that help you understand the calculations to be made, particularly when renewing the contract.

It should be noted, however, that in the first two cases (see table below), the discounts may be even greater. In other words, an extra reduction of 2% or 5%, respectively, is applied for each renewal for the same period, until a rate of 14% is reached.
 

For example: for a six-year lease, the landlord pays an IRS tax rate of 23%, but if the lease is renewed for another six years, the landlord will pay an IRS tax rate of 18%.

In the case of a four-year contract, the landlord pays an IRS rate of 26%, which drops to 24% after a renewal for the same period.

The calculations are slightly different if the contract renewal period is different from the initial contract.

According to a publication by ECO, a six-year contract that is renewed for three years will be subject to an IRS rate of 21% (23%-2%). A four-year contract that is then renewed for five years will have an IRS rate of 21% (26%-5%).

It should be noted that all these scenarios, and their respective discounts, only cover contracts signed after January 1, 2019, when this law came into force. In the case of contracts signed before this date, the scenario is slightly different, since regardless of the duration of the lease contracts, what counts is the contract renewal period, writes ECO.

This means that in the case of a ten-year contract, renewable for five years, the IRS rate will be calculated based on these five years, and will therefore be 23%. In the case of a three-year contract, renewable for 15 years, the rate to be applied will be 14% (the maximum ceiling).

Source: idealistanews