By Benjamin Roure L'Hermitte
Tax reduction in France, défiscalisation, covers the legal ways to lower your income tax: deducting certain sums from your income, such as payments into a PER retirement plan, or getting tax reductions and credits for donations, household employment, investing in small companies, in property or in France's overseas territories through the Girardin industriel scheme. Most of these benefits are capped at €10,000 a year per household, €18,000 with overseas investments and Sofica film funds. This guide sets out the schemes in force in 2026, what they are worth, their limits and their risks.
- Overall cap of €10,000 a year on most tax benefits, €18,000 with overseas investments and Sofica; donations are outside the cap.
- PER: 2026 payments deductible up to 10% of 2025 income, from €4,710 to €37,680.
- Girardin industriel: a tax reduction of 38.25% to 63.42% depending on the territory and sector, in exchange for a non-refundable contribution and a risk of reassessment.
- Without investing: 66% of donations as a reduction, 50% of household employment costs as a tax credit.
Three mechanisms exist side by side. A deduction lowers taxable income, so it is worth more the higher your marginal tax rate. A tax reduction comes off the tax due but cannot create a refund. A tax credit also comes off the tax, and any excess is refunded, which makes it useful even to households that pay no tax.
The rules quoted come from the official 2026 income tax guide, the 2026 Finance Act and the BOFiP, France's official tax guidance. A tax benefit does not turn a poor investment into a good one: judge it together with the return, the risk and how long the money is locked up.
TL;DRIn 2026, most French tax benefits are capped at €10,000 a year per household, €18,000 with overseas investments and Sofica. The simplest are donations (a 66% or 75% reduction) and household employment (a 50% tax credit). A PER lets you deduct payments up to 10% of your income. Tax-advantaged investments (small companies at 18%, Denormandie, Malraux, Sofica, Girardin industriel at 38.25% to 63.42%) lock money up for years and can lose capital.
The overall cap on tax breaks: €10,000 a year
Tax reductions and credits obtained in return for an investment or a service cannot cut tax by more than €10,000 a year per household. The limit rises to €18,000 for overseas reductions, including the Girardin industriel, and Sofica. It covers in particular the reduction for investing in small companies, the Denormandie, Loc'Avantages and the household employment tax credit.
Outside it: donations, the Malraux for operations started since 2013, listed historic buildings and property losses (déficit foncier). A household combining a €4,000 household employment credit and a €9,000 reduction for subscribing to small-company shares reaches €13,000: €3,000 exceeds the cap, and that excess small-company reduction carries forward over the next five years.
Cutting tax without investing: donations and household employment
- Donations: 66% of the amount given to a public-interest association or foundation comes off your tax, up to 20% of taxable income, with any excess carried forward five years. The rate rises to 75% for organisations helping people in hardship, on up to €2,000 of donations in 2026. A €300 donation therefore costs €102 at 66% and €75 at 75%.
- Household employment: cleaning, childcare at home, tutoring, gardening or care for elderly people give a tax credit of 50% of the cost, on up to €12,000 a year, plus €1,500 per dependent child or person over 65, without exceeding €15,000. €6,000 of spending gives a €3,000 credit.
The PER: deducting payments from your income
Voluntary payments into a PER retirement savings plan are deducted from taxable income. In 2026, the limit is 10% of 2025 earned income, at least €4,710 and at most €37,680, plus unused allowances from previous years. The saving depends on your marginal rate: €5,000 paid in by a household taxed at 30% cuts tax by €1,500. Since 2026, payments made after age 70 are no longer deductible.
It defers tax rather than giving it away: the money is locked until retirement, except for early-release cases, and the deducted sums are taxed on the way out. A PER mostly makes sense when your marginal rate is higher while working than in retirement.
Investing in small companies: the IR-PME reduction
Subscribing to shares of an unlisted small company, directly or through certain funds, gives a tax reduction of 18% of the amount in 2026, on up to €50,000 a year for a single person and €100,000 for a couple. The shares must be kept until the end of the fifth year. The rate rises to 25% for social and solidarity enterprises (ESUS) and solidarity property companies, under conditions and depending on the payment date. A €10,000 subscription at 18% cuts tax by €1,800.
Funds have almost all lost this benefit: the reduction for FCPI innovation funds ended for payments made since February 21, 2026, except for funds invested in young innovative companies, and FIP local funds lost it on February 16, 2025, except in Corsica and overseas. Investing in an unlisted small company remains risky: the money is locked up and losing all of it is possible.
Reducing tax through property in 2026
- Property losses (déficit foncier): on unfurnished lettings, costs and works above rental income create a loss deductible from overall income up to €10,700 a year, excluding loan interest, and up to €21,400 for energy renovation works that lift a home out of classes E, F or G, paid by December 31, 2027. It is outside the overall cap.
- Denormandie: buying an older home in certain towns, with works of at least 25% of the total cost, let unfurnished under rent caps; a reduction of 12%, 18% or 21% of the price for a 6, 9 or 12-year letting, on up to €300,000, for investments made by December 31, 2027.
- Malraux: full restoration of a building in a protected heritage area; a reduction of 22% or 30% of the works, on up to €400,000 over four years, in exchange for nine years of unfurnished letting. It is outside the overall cap.
- Loc'Avantages: a reduction of 15% to 65% of rents for a home let below market rates under an agreement with the Anah housing agency, until December 31, 2027.
- Private landlord status: since February 21, 2026, a deductible depreciation for unfurnished lettings of new or renovated homes, covered in our guide to buy-to-let in France. The Pinel scheme ended on December 31, 2024.
Girardin industriel: reducing tax through overseas investment
The Girardin industriel finances new equipment, vehicles, machinery or renewable energy installations, leased to a business in France's overseas territories. The investor makes a contribution to a holding company that is never returned: after five years, the equipment is sold to the operator for a nominal price. In exchange, the investor gets a tax reduction larger than the contribution the following year. Part of the benefit, 56% or 66% depending on the size of the programme, is passed back to the operating business.
| Tax reduction in 2025 (rate direct / with 66% passed back / with 56%) | Rate |
|---|---|
| French Caribbean, Réunion, French Polynesia, Saint-Martin, Saint-Barthélemy, TAAF | 38.25% / 45.3% / 44.12% |
| French Guiana, Mayotte, New Caledonia, Saint-Pierre-et-Miquelon, Wallis and Futuna | 45.9% / 54.36% / 52.95% |
| Renewable energy, second group of territories | 53.55% / 63.42% / 61.77% |
Only the share of the reduction the investor keeps, 34% or 44%, counts toward the €18,000 cap, which allows reductions well above that amount. The scheme runs until December 31, 2029. Large programmes require approval from the tax authorities.
The risks are real, as France's AMF, tax authority and consumer protection agency point out. If the equipment is not operated for five years, or the arrangement breaks the rules, the reduction is clawed back, even if the investor did nothing wrong; one investor had to repay more than they put in. Add the risk of fraud and, when the holding company is a general partnership (SNC), unlimited liability for its debts. Before signing, check the programme's approval and that the arranger is on the prefecture's register.
Sofica: financing film and television
Sofica funds finance film and series production. A subscription gives a 30% reduction, raised to 36% or 48% depending on the fund's commitments, on up to 25% of net overall income and €18,000 a year. Shares are held five years, and the capital returned at exit is often below the amount invested: the reduction partly offsets that risk. Subscriptions are open until December 31, 2026.
Where to start
- Use first what requires no risky investment: donations and household employment, if those expenses make sense for the household.
- Look at a PER if your marginal rate is at least 30% and the money can wait until retirement.
- Move to tax-advantaged investments only with long-term money, counting the tax benefit as a bonus rather than the reason to invest.
- Check that the total stays under the €10,000 or €18,000 cap, beyond which the benefit is lost or only carried forward.
For large property holdings, the French real estate wealth tax has its own levers, and a wealth manager can help choose between schemes. This guide is for information and is not personalised tax advice.
Frequently asked questions
What is the cap on French tax breaks in 2026?
€10,000 a year per household for most tax reductions and credits linked to an investment or a service, €18,000 with overseas reductions and Sofica. Donations, the Malraux, historic buildings and property losses are outside it.
How does the Girardin industriel work?
The investor makes a non-refundable contribution to a company that buys new equipment leased to a business in France's overseas territories. The following year, they get a tax reduction larger than the contribution, from 38.25% to 63.42% of the investment depending on the territory, sector and share passed back. The reduction can be clawed back if the arrangement breaks the rules.
How much does a PER payment save?
It cuts tax by the amount paid times your marginal tax rate: €1,500 for €5,000 paid in at 30%. The sums are taxed on the way out, in retirement.
What is the tax reduction for investing in a small company in 2026?
18% of the amount, on up to €50,000 a year for a single person and €100,000 for a couple, provided the shares are kept until the end of the fifth year. 25% for social and solidarity enterprises and solidarity property companies, under conditions.
Does the Pinel scheme still exist in 2026?
No, it applies to investments made until December 31, 2024. The Denormandie for older homes remains open until December 31, 2027, and the 2026 Finance Act created a private landlord status.
Do donations count toward the tax break cap?
No. Donations give a 66% reduction up to 20% of taxable income, or 75% on up to €2,000 for organisations helping people in hardship, outside the overall cap.