Here's a house on the other side of the vineyard from us.I don't think it's for sale though. Somebody recently fixed it up.
The Figaro newspaper, in its article on the subject, says that a couple or individual will be able to deduct from their income taxes 40% of the mortgage interest they pay in the first year after buying a house or apartment. The deduction for a couple is limited to a maximum of 3,000 € that first year. For a single buyer, that ceiling is cut in half.
Over the subsequent four years, the tax deduction is 20% of mortgage interest paid, with a limit of 1,500 € for a couple and 750 € for a single buyer. For a couple with no dependents, the tax deductions over five years will come to a maximun of 9,000 €. After five years, the tax deduction ends.
Rows of vines in the Renaudie vineyards. This is one of myposts where the pictures don't have much to do with the text.
I think Americans take the tax deduction based on mortgage interest for granted, but in France it is a new law. Sarkozy wanted the deduction to apply to existing as well as new mortgages, but the French Constitutional Council ruled that making it retroactive was unconstitutional. I don't understand the reasoning behind that ruling. Maybe somebody will explain in a comment.
As a result, only mortgages entered into after May 6, 2007, are eligible for the tax deduction. May 6 is the day Nicolas Sarkozy was elected President of the Republic.
BerriesPersonally, I'd be a little upset if I had taken out a big mortgage earlier in 2007. I've already heard it mentioned on the news that some people might consider selling recently purchased property to buy something else in order to get the tax deduction on a new mortgage. One commentator said he doubted that people who did that would reap any real benefit.
There are four houses in this picture. Oursis the one on the left that has a dark brown roof.
The French in general take out mortgages for a 10- or 20-year term, not 30 as in the U.S. I don't think that interest-only or negative-amortization loans exist in France. An aside: I just read that only 5% of British borrowers take out fixed-rate mortgages, while the other 95% take out adjustable-rate loans. That is a big problem in the the United Kingdom now. The default rate is high and rising, as it is in the U.S.
ApplesFrance is not a society that runs on credit. For example, there really aren't any credit cards here. The only bank cards you can get are debit cards, as far as I know. Somebody will correct me if I'm wrong. The only option we have on our MasterCards from the Crédit Agricole bank is whether we want our account to be debited each time we make a purchase or withdraw funds, or whether we want it to be debited just once, at the end of the month.
More applesWe never get letters in the mail offering us new credit cards. We used to get at least of few of those every month or even every week when we lived in California. In France, it's pretty much pay-as-you-go.
You can get credit cards here, but it's a fairly new thing, and they're not exactly the same as in the US. Mastcards offers one called the "carte gold", where you can use it to either buy or withdraw money up to a certain limit. It costs about 100€ per year though, but considering that it offers travel insurance, car insurance, accident insurance, etc, it can be a good idea if you're travelling abroad. Both of my sister-in-laws got one before traveling to North America for those reasons.
ReplyDeleteHi Ken !
ReplyDelete/*/ …… I think Americans take the tax deduction based on mortgage interest for granted, but in France it is a new law. …/… /*/
Actually it's not really "new": it is simply the latest iteration in an ongoing tussle in the somewhat arcane arena of the left/right disagreement on how the financial world works, and what money is. (grin) There was a similar scheme in force before 1997 … the media have lobotomized the French so adroitly that few apparently remember …
// ../…. La déductibilité des intérêts d'emprunts n'est pas une nouveauté, encore moins une rupture. Un dispositif similaire existait déjà avant 1997. Il s'agissait d'une réduction d'impôt de 25 % des intérêts acquittés pendant 5 ans. Mais les experts, en particulier la commission Ducamin, ont estimé que cette déduction fiscale avait été d'une efficacité toute relative pour déclencher des actes d'achat. Son montant modeste - 5 000 francs par ménage (762,25 euros) en moyenne - et son impact différé sur le budget des acquéreurs, qui n'en perçoivent le bénéfice qu'un an après l'achat du logement, n'ont pas réellement permis de doper le marché immobilier de l'époque.
En revanche, pour l'Etat, la dépense fiscale s'élevait tout de même à un petit milliard d'euros par an. Pour pallier ces inconvénients, la réduction d'impôt a été peu à peu remplacée par le prêt à taux zéro (PTZ), entré en vigueur le 1er octobre 1995, et qui est une autre forme d'allégement du coût du crédit, mais ciblée sur les revenus compris entre deux et trois smic. …/… // http://tinyurl.com/2pgfdf
/*/ …/… After five years, the tax deduction ends. …/… /*/
What happens with a lot of these laws about "finance" is that they rarely come to fruition. Amerloque is not sanguine at all and doesn't believe for a second in the"five years", for three reasons:
1) Past experience demonstrates that the Ministry can and does go back on time limits. One has only to look at the recent reversal of the "assurance vie" timelimits and tax deductions, which shafted hundreds of thousands of people who thought they wouldn't be paying tax for a while and who have had to pay far earlier than they thought.
2) There is little or no "grandfathering" here when it comes to laws about "finance".
3) Some laws about "finance" in France can be – are frequently are – retroactive; it is a principle of French "droit fiscal". It is usually a question of "interpretation"; the said law is "reinterpreted". This is unpalatable to quite a few American companies who were planning on setting up in France. (sigh)
// …/… Il y a des cas où l'adoption d'une loi rétroactive se justifie, comme par exemple des situations exceptionnelles n'ayant pas donné au législateur le loisir d'élaborer sereinement une loi. C'est également le cas en droit fiscal lorsqu'une loi de finance s'applique aux revenus perçus et aux résultats réalisés au cours de l'année de son adoption. On parle alors de « petite rétroactivité ».
L'adoption de lois interprétatives ou de lois de validation constitue une exception au principe de non-rétroactivité et est soumise à des conditions. …/… // http://tinyurl.com/2vufau
/*/ …/… Sarkozy wanted the deduction to apply to existing as well as new mortgages, but the French Constitutional Council ruled that making it retroactive was unconstitutional. I don't understand the reasoning behind that ruling. Maybe somebody will explain in a comment. …/… /*/
French law and jurisprudence state that there may not be a "rupture d'égalité devant l'impot", and that's quite clearly what this is. (grin)
// …/… "Le Conseil constitutionnel a censuré cette disposition pour rupture de l'égalité entre contribuables", dit l'institution.
…/…
Le "cadeau" n'aurait pas un objectif d'intérêt général pour les emprunts en cours, dit le Conseil, "car, par définition, pour ceux-ci, le contribuable est déjà propriétaire de son habitation principale", ajoute-t-il cependant.
…/…
"Il s'agit alors d'un soutien au pouvoir d'achat au bénéfice des seuls contribuables propriétaires de leur habitation principale", estime-t-il. …/… // http://tinyurl.com/2wq7jx
// …/… I've already heard it mentioned on the news that some people might consider selling recently purchased property to buy something else in order to get the tax deduction on a new mortgage. One commentator said he doubted that people who did that would reap any real benefit. …/… //
A relatively murky area will be coming to the fore soon in the press, when people (like radio commentateurs) realize that they can refinance. If by doing so they close out the pre-election-day mortgage 100% and start up a new one on the same property … (grin) …
/*/…/… The French in general take out mortgages for a 10- or 20-year term, not 30 as in the U.S. …/… /*/
Yes. During 2006, though, some banks offered 30-year mortgages and one even a 50-year one ! (If Amerloque recalls correctly, mortgages must be paid off here before the borrower reaches the age of 75. Bonjour, les SCI !
// …/… France is not a society that runs on credit. …/… //
Sadly, it has changed quite a bit in the last 10 years. (sigh)
/*/ For example, there really aren't any credit cards here. The only bank cards you can get are debit cards, as far as I know. /*/
Depends on the bank and/or the financial organization.
Banks really can't offer "credit cards" because of the Loi Scrivener, which states that all balances in outstanding current accounts must be paid off every 60 days, rain or shine. Since the "credit card" is linked to the current account, it can never really be a "credit card" in the American sense of the term.
Financial entities like COFINOGA and SOFINCO offer what in America are called "credit" cards, or "revolving credit cards". There is a minimum monthly payment on the outstanding balance, but one can keep using the card as long as the max outstanding balance isn't reached.
Hypermarkets such as Auchan and Carrefour offer the same kind of "revolving credit card" … which can be used at venues other than the hypermarkets, if the establishment has signed up …
On balance and in spite of the changes in the last decade, Ken is spot on: this is a country where cash pay-as-you-go counts ! The French are frugal … (grin)
Best,
L'Amerloque
Ken, I think your new camera is terrific. In the vineyard pictures one can see finest detail in the foreground and also in the background. More pictures, please. And don't forget the bread lady. Mary Boyken
ReplyDeleteKen,
ReplyDeleteVery interested in your blog about mortgage tax relief.
My mother in law has a gorgeous house in Noyers Sur Cher which she is considering selling to the UK market.
The mortgage tax relief may make the difference between someone buying it and not. I'll pass this info onto her.
Love your blogs by the way. So nice to catch a daily glimpse of St Aignan.
We visit every year in the summer. This summer was cooler than last, which was good for the kids, and boy was the River Cher high at Montrichard! We couldn't believe it! It was also very green and lush compared to 2006.
Take care.
Matthew Adams