TLDR: The allocation of expenses and losses across income categories follows specific rules for each category, with varying deductibility limits and allocation methods based on the nature of the activity and type of income. It is essential to identify the asset share and internal accounting associated with each activity, dividing expenses proportionally based on the revenue generated by each income category.
Property Income Losses
Property income losses (déficits fonciers) are deductible only from future property income, up to the sixth subsequent year. Only a portion of these losses can be offset against global income, following specific rules. Financial expenses related to mixed-use properties must be allocated according to the criteria for distributing rental expenses among occupants.
Movable Capital Losses
Movable capital losses cannot be offset against global income but only against income of the same nature in the following six years.
Expense Allocation
When a taxpayer has activities generating income in different categories, expenses must be allocated correctly. This process requires two key steps:
- Identify the asset share and internal accounting associated with each activity.
- Divide expenses based on the proportion of revenue generated by each income category.
Non-Deductible Expenses
Expenses that are non-deductible in one category cannot be transferred to other income categories. This rule also applies when losses originate from different categories, provided the specific conditions of each are met.
Stringent Limitations
Some categories of losses have strict limitations. For example, movable capital losses cannot be offset against other income categories but only against income of the same nature in the following six years. Financial expenses related to mixed-use properties must be precisely allocated: only the portion corresponding to rental use is deductible from property income.
Partnerships
In partnerships conducting taxable activities across different categories, determining the results for each activity requires identifying the asset share associated with each activity and establishing internal accounting to track specific costs and revenues. Common expenses must be allocated based on the proportion of revenue generated by each activity.