Renovations: the final tax window of opportunity for homeowners

The announced end to the tax on rental value is already altering the plans of many property owners. According to *Le Temps*, the referendum on 28 September 2025 has clarified the timeline: the tax on rental value is set to be abolished from 1 January 2029. In the meantime, those affected are seeking to take advantage of the current system one last time, particularly for renovations that may qualify for tax deductions.

For SME directors, the self-employed and trustees, the issue extends far beyond the private sphere. A property may be privately owned, used partly for business purposes, incorporated into a company structure or financed using cash flow closely linked to the family business. The question is therefore not just whether to renovate, but when, how to document the work, and what impact this will have on cash flow, tax liabilities and accounting.

A reform that speeds up decisions on building works

The tax on rental value is based on a specific principle: an owner living in their own home is taxed on a notional income corresponding to the economic benefit of living in their property. In return, the current system generally allows certain property-related expenses to be claimed, notably maintenance costs, in accordance with the rules applicable to each specific case.

It is precisely this balance that makes the current period a sensitive one. As long as the scheme remains in place, property owners can still seek to coordinate their renovation work with their tax returns. Once the rental value tax is abolished, the treatment of certain deductions will no longer be assessed within the same tax framework. Le Temps has already noted a rush to carry out tax-deductible renovations, a sign that the market is anticipating the reform even before it comes into force.

For an SME or a self-employed person, this rush may have very tangible consequences. An entrepreneur who uses part of their home as an office, a self-employed doctor who owns their practice premises, or a family-run business whose partners own the property separately must avoid making decisions in haste. An invoice paid too early, too late, incorrectly worded or insufficiently documented can complicate tax justifications. Conversely, well-prepared planning helps to avoid confusing legitimate tax optimisation with risky improvisation.

Maintenance or improvement: the line that determines the deduction

In tax practice, not all renovations are treated equally. In principle, a maintenance expense is intended to keep the property in good condition, replace worn-out parts or preserve its existing value. An expenditure that increases comfort, enlarges the property or creates new value may be treated differently. This distinction is crucial, as it affects whether the costs can be deducted on the tax return.

The difficulty arises from the fact that a single project often involves several different types of expenditure. A renovation of a kitchen, façade, roof or technical installations may involve replacement, modernisation and a qualitative improvement all at once. The owner sees a single project; the tax authorities may identify several categories of cost. This is where the role of the tax adviser becomes crucial: analysing quotes, breaking down the items, requesting itemised invoices and preparing a coherent file before submitting the tax return.

Self-employed individuals must be particularly careful when the property is used for mixed purposes. If part of the building is used for business purposes, the breakdown of costs must be justifiable. Work relating exclusively to the private part, work affecting the business premises, and work covering the entire building are not treated in the same way. An approximate, undocumented allocation formula may become a point of contention during an audit.

The tax invoice must not obscure the cash invoice

The prospect of a tax deduction may give the impression that a renovation project automatically becomes cost-effective. This is a common misconception. A deduction reduces the taxable base; it does not reimburse the cost of the work. The owner must first finance the renovations, make advance payments, check the VAT charged by contractors and absorb any budget overruns. For a business owner, these outgoings may compete with the needs of the business: stock, wages, productive investments or debt repayment.

Good planning therefore begins with a cash flow budget. The homeowner’s household and the business are not always legally one and the same, but in family-run SMEs, financial flows are interlinked. Withdrawing more from the business to fund a private project may affect the wage situation, dividends, investment capacity or available reserves. Conversely, postponing certain works may avoid a cash flow squeeze, but could result in missing out on a tax deduction under the current tax regime.

The banking aspect must not be overlooked. A major renovation project may require financing, a mortgage adjustment or a discussion with the lending institution. The announced abolition of the rental value allowance may also alter the way a property owner assesses the net cost of their property over time. It is not simply a matter of maximising a tax deduction in a single year, but of understanding the overall cost: the cost of the works, tax implications, interest, future maintenance and the property’s value in use.

Quotes, advance payments, invoices: the tax file is compiled before the work begins

For a property management firm, the main operational risk is receiving documents too late. A renovation decided upon at short notice, with lump-sum invoices that lack detail, leaves little scope for correctly categorising the expenditure. Yet the tax file is prepared as soon as a quote is requested. Quotations should distinguish between replacement items, additions, alterations and professional fees. Final invoices should follow a clear structure, with sufficiently precise descriptions.

It is also prudent to keep evidence of the nature of the work: before-and-after photos, technical specifications, reports, any permits, correspondence with tradespeople and proof of payment. These documents are not intended to add to the administrative burden; they help to document the building project for tax purposes. Several years later, when the details are no longer fresh in people’s minds, a well-organised file can make all the difference.

Construction firms, architects and property management companies may also be indirectly affected. The demand for tax-deductible renovations can boost the volume of contracts, but it also requires greater administrative rigour. Clients will request more detailed invoices, a breakdown by type of work or supporting certificates. For these service providers, the quality of their record-keeping becomes a selling point, particularly amongst a clientele of contractors accustomed to thinking in terms of tax and accounting.

A tight schedule, but no reason to renovate haphazardly

Le Temps reports that statistics already show a boom in renovations. This trend may have knock-on effects: fuller order books, longer planning lead times, pressure on tradespeople’s availability and more difficult trade-offs for property owners. The closer the deadline for the abolition of the rental value allowance approaches, the more costly hastily made decisions are likely to be.

For SMEs that own their premises, the decision-making process must also take day-to-day operations into account. Renovating an occupied building can disrupt business activities, customer service, production or administrative work. A potential tax saving does not necessarily offset an operational loss, internal disruption or a poorly coordinated renovation project. The appropriate tax timetable must therefore be balanced against the operational timetable.

A prudent approach involves drawing up several scenarios: essential works to be carried out before the tax is abolished, works that can be postponed, works to be spread across different tax years, and expenditure whose treatment must be clarified in advance. Depending on the situation, it may be worth seeking a bespoke tax analysis, particularly where the sums involved are substantial, the property is used for mixed purposes, or where several owners are involved.

The end of the rental value allowance marks the start of a transition period where anticipation is better than reaction. Renovations may still be worthwhile, both fiscally and economically, but only if they meet a genuine need, fit within a controlled cash flow and are backed by sound documentation. For property owners and their trustees alike, the coming years will be less of a race and more of a process of sorting things out: distinguishing between useful works, defensible deductions and decisions that will withstand the change in the tax regime.