The Impot sur la Fortune Immobiliere (IFI), which came into effect on 1 January 2018 replacing the Impot de Solidarite sur la Fortune (ISF), targets only real estate assets held directly or indirectly by the taxpayer. This fundamental shift in the scope of the wealth tax has very concrete consequences for life insurance holders. While financial assets are now excluded from the wealth tax base, life insurance contracts invested in real estate-linked funds remain within the scope of the IFI. Understanding this interplay is essential for correctly declaring your wealth and optimising your tax position.
The IFI: a tax targeted at real estate assets
Unlike the ISF, which covered the entire net taxable estate, the IFI concerns only real estate assets in the broad sense, in accordance with Articles 964 to 983 of the Code General des Impots. This change has profoundly altered the relationship between savers and life insurance: a contract invested exclusively in euro-denominated funds and equity unit-linked funds no longer falls within the wealth tax base at all, whereas it would have been fully declarable under the ISF.
The threshold and the tax scale
The IFI applies to households whose net real estate wealth exceeds 1 300 000 euros as of 1 January of the tax year. The scale is progressive:
- 0.50% from 800 000 to 1 300 000 euros
- 0.70% from 1 300 000 to 2 570 000 euros
- 1% from 2 570 000 to 5 000 000 euros
- 1.25% from 5 000 000 to 10 000 000 euros
- 1.50% above 10 000 000 euros
There is a subtlety: although the trigger threshold is 1 300 000 euros, the IFI is calculated from 800 000 euros thanks to a reduction mechanism. A taxpayer whose net real estate wealth is exactly 1 300 000 euros will therefore pay IFI calculated on the 800 000 to 1 300 000 euro bracket, amounting to 2 500 euros.
Which life insurance assets are subject to the IFI?
The principle: only the real estate portion is taxable
A life insurance contract is not in itself a real estate asset. Only the portion of the surrender value representing real property or real estate rights is included in the IFI base, pursuant to Article 972 of the CGI. In practice, this concerns unit-linked funds invested in vehicles whose assets are composed wholly or partly of real estate.
Assets that are included
The following unit-linked funds are included in the IFI base:
- SCPI (Societes Civiles de Placement Immobilier): the full value of SCPI units held as unit-linked funds is generally subject to the IFI, since their assets are almost entirely composed of real estate. On a contract like Linxea Spirit 2 which offers a wide range of SCPI, each SCPI held as a unit-linked fund will be declarable.
- OPCI (Organismes de Placement Collectif Immobilier): the real estate portion of the OPCI is included. OPCIs generally hold between 60% and 65% real estate, with the remainder invested in securities and cash.
- SCI (Societes Civiles Immobilieres): if SCI shares feature among the unit-linked supports, their real estate portion is declarable.
- Real estate funds: any fund whose assets are composed mainly of real estate, including fund-of-funds investing in real estate.
Assets excluded from the IFI
The following are not subject to the IFI:
- The euro-denominated fund: even though it may contain a significant real estate component (between 5% and 15% of the allocation for most insurers), the tax authorities consider that the policyholder holds only a claim on the insurer, not a real estate asset (Article 972, III of the CGI)
- Unit-linked funds invested in equities, bonds, or diversified funds (excluding real estate)
- Unit-linked funds invested in ETFs (trackers) even if the underlying contains a marginal real estate component
- Unit-linked funds invested in equity UCITS or other non-real-estate vehicles
The euro-denominated fund: an overlooked IFI advantage
The treatment of the euro-denominated fund is a major and often overlooked advantage. Euro funds from leading insurers typically contain between 5% and 15% real estate in their asset allocation. For example, the euro fund of Boursorama Vie or Lucya Cardif holds a significant real estate share. Yet these amounts are not declarable for IFI purposes because the policyholder does not directly hold the underlying assets but rather a claim on the insurer. This position has been confirmed by the tax authorities in the BOFiP (BOI-PAT-IFI-20-20-20-30). For a 200 000 euro holding in a euro fund containing 10% real estate, this means 20 000 euros escaping the IFI.
How to calculate the taxable real estate portion
Calculating the real estate fraction of a life insurance contract requires following a rigorous three-step method, which can become complex when the contract contains many unit-linked funds.
Step 1: Identify the real estate funds
Check your annual life insurance statement or log in to your online account to obtain the list of unit-linked funds with a real estate component and their valuation as of 1 January. Since 2018, insurers are required to communicate this information to policyholders.
Step 2: Determine the real estate fraction of each fund
For each fund, apply the actual percentage of real estate assets held by the fund:
- SCPI: generally 100% (virtually all assets are real estate)
- OPCI: variable, often between 60% and 90% (the real estate pocket can vary by OPCI)
- Diversified funds containing real estate: only the real estate fraction is included, to be determined from the fund's annual report
Step 3: Add up the real estate fractions
The sum of all real estate fractions of your unit-linked funds constitutes the amount to declare for IFI purposes for your life insurance contract.
Worked example: Helene, 60, CFO
Helene, 60, is a CFO in an industrial group. She holds a Linxea Spirit 2 life insurance contract with a surrender value of 620 000 euros as of 1 January 2026, allocated as follows:
| Fund | Value | Real estate fraction | IFI amount |
|---|---|---|---|
| Spirica euro fund | 250 000 euros | 0% (excluded) | 0 euros |
| International equity unit-linked funds | 120 000 euros | 0% | 0 euros |
| SCPI Pierval Sante | 60 000 euros | 100% | 60 000 euros |
| SCPI Remake Live | 45 000 euros | 100% | 45 000 euros |
| OPCI Opcimmo | 80 000 euros | 65% | 52 000 euros |
| Bond unit-linked funds | 65 000 euros | 0% | 0 euros |
Total declarable for IFI from the life insurance contract: 157 000 euros
Helene also owns her primary residence valued at 1 800 000 euros. After the 30% reduction provided by Article 973 of the CGI, the IFI value of her primary residence is 1 260 000 euros. She also has an outstanding mortgage of 300 000 euros on this property (deductible under certain conditions).
Her net IFI real estate wealth: 1 260 000 - 300 000 + 157 000 = 1 117 000 euros. This amount is below the 1 300 000 euro threshold: Helene is not liable for IFI this year. However, if she were to repay her mortgage early, she would cross the threshold and become liable. Switching the SCPI to equity unit-linked funds could then be considered.
Strategies to limit the IFI impact
1. Favour the euro fund for portfolios near the threshold
For portfolios close to the IFI threshold, the euro-denominated fund has the advantage of being excluded from the base, even though it contains real estate internally. However, this choice must be weighed against return and diversification objectives. A euro fund yielding 3% net versus a SCPI yielding 4.5% gross (before IFI) may still be more attractive despite the IFI liability, depending on the applicable marginal IFI rate.
2. Switch to non-real-estate unit-linked funds
If the overall real estate wealth approaches or exceeds the 1 300 000 euro threshold, switching real estate unit-linked funds to non-real-estate unit-linked funds (equity ETFs, bond funds, profiled management) reduces the IFI base without triggering any withdrawal tax. Switches within the contract are not withdrawals and therefore generate no taxation. This is a powerful and immediate lever.
3. Compare the IFI cost to SCPI returns
Before disposing of SCPI held in unit-linked funds for IFI reasons, compare the actual IFI cost to the net return provided by these funds. If the marginal IFI on 100 000 euros of SCPI is 0.70% (i.e. 700 euros) and the SCPI generates a return of 4.5% (i.e. 4 500 euros), a purely tax-driven switch would be counterproductive.
| Fund | Estimated 2024 return | Subject to IFI | Return net of IFI (0.70% marginal rate) |
|---|---|---|---|
| High-performing euro fund | 3.00% | No | 3.00% |
| SCPI in unit-linked funds | 4.50% | Yes (100%) | 3.80% |
| OPCI in unit-linked funds | 3.50% | Yes (fraction ~65%) | 3.05% |
| Global equity ETF | 8% (long-term historical) | No | 8.00% |
| Bond unit-linked funds | 3.80% | No | 3.80% |
4. Use the IFI cap
The IFI capping mechanism provides that the total of IFI and income tax cannot exceed 75% of the taxpayer's income. Income from undrawn life insurance contracts is not taken into account in this calculation, which can lead to a beneficial capping effect for taxpayers whose income is modest relative to their real estate wealth.
5. Beware of Luxembourg contracts
Luxembourg life insurance contracts receive no special treatment under the IFI. A French tax resident must declare the real estate portion of their Luxembourg contracts under the same conditions as a French contract. Luxembourg's tax neutrality does not apply to the IFI.
The insurer's reporting obligation
The annual statement
Since 2018, insurers have been required to communicate to the policyholder the value representing real estate assets contained in each contract. This information appears on the annual situation statement, generally available in January or February. Leading online brokers such as Linxea, Boursorama, or Lucya display this information directly in the client's online account.
If information is not provided
If the insurer does not provide details of the real estate fraction, the taxpayer must carry out their own research:
- Consult the annual reports of the SCPI and OPCI (available on the management companies' websites)
- Check fund composition on the management company's website or on specialised sites
- Contact the insurer or broker directly for details
- As a last resort, use the full value of the real estate unit-linked funds as the declarable base
Risk of reassessment in case of under-declaration
The tax authorities have the right to audit IFI declarations. In the event of undervaluation or omission of the real estate portion of life insurance contracts, the taxpayer faces a reassessment with penalties ranging from 10% (in good faith) to 40% (for deliberate non-compliance). Since insurers now transmit information to the tax authorities, automatic cross-checks are possible. Be rigorous in your declarations.
Practical IFI declaration
The real estate portion of life insurance contracts must be declared on the IFI annex (form 2042-IFI), in the section relating to real estate held indirectly. The taxpayer must indicate:
- The insurer's identity and the contract name
- The contract number
- The surrender value representing real estate assets as of 1 January
- Details of the real estate funds if requested by the authorities
The IFI declaration is integrated into the online income tax return on impots.gouv.fr. Taxpayers whose net real estate wealth is below 1 300 000 euros have no IFI reporting obligation, even if they hold real estate unit-linked funds in their contracts.
Special cases to be aware of
SCPI held directly vs in life insurance
The same SCPI held directly and as a unit-linked fund in life insurance is not treated identically. When held directly, the unit value as of 1 January is used. As a unit-linked fund, it is the surrender value of the unit-linked fund as of 1 January that is taken into account, which may differ slightly from the direct unit value due to the insurer's own valuation method.
Non-surrenderable contracts
Non-surrenderable life insurance contracts (retirement contracts such as PER in the annuity phase) raise specific questions. In principle, only surrenderable contracts fall within the IFI base, with the surrender value being the reference value.
Conclusion
The IFI and life insurance have a nuanced relationship. While real estate unit-linked funds (SCPI, OPCI, SCI) are indeed taxable under the IFI, the euro-denominated fund remains excluded from the base, offering a significant optimisation lever for substantial portfolios near the threshold. An appropriate allocation of funds within the contract, combined with a cost/return analysis of SCPI against the marginal IFI rate, makes it possible to manage the IFI impact while preserving wealth objectives of return and diversification.
The tax information presented in this article is current at the time of writing and is provided for informational purposes only. It does not constitute personalised tax advice. For any wealth-planning decision, consult a wealth management adviser or tax lawyer.