Abolition of the Imputed Rental Value: Impact on Homeowners

The planned abolition of the imputed rental value raises many questions for homeowners: What does this reform mean in concrete terms? What impact will it have on taxes and investments? And how should property owners prepare for these changes?

In our blog post, we delve into the background of this decision and provide an overview of the planned adjustments, such as the restrictions on tax deductions or the introduction of a property tax for secondary residences. We also explain why it might be worthwhile to carry out maintenance or renovations under the current conditions and what this means for the real estate market as a whole.

Published on: December 23, 2024 | Reading time: Approximately 5 minutes

What’s Next?

After more than seven years of intense discussion, the Swiss Parliament made a significant decision in the 2024 winter session: the abolition of the imputed rental value for primary and secondary residences. However, before this systemic change in property taxation can be fully implemented, the introduction of a property tax on secondary residences must be approved in a public vote. This sets the stage for a decisive year, which homeowners and mortgage holders should closely monitor. A summary of the decision can be found here.

What is the Imputed Rental Value, and Why is it Being Abolished?

The imputed rental value is a fictitious income that Swiss homeowners are required to declare as taxable income when living in their own property. This regulation, which originated in the 1930s, was initially introduced to stabilize public finances. At the same time, homeowners could claim tax deductions for mortgage interest, maintenance, and repairs, which encouraged investments and provided relief for those with high mortgages.

Over the years, however, the imputed rental value has come under increasing criticism. Many homeowners find the taxation unfair, especially when their mortgages are largely paid off and they can no longer claim significant deductions. The planned abolition aims to simplify the tax system but also presents new challenges.

Key Changes at a Glance:

• Abolition of the imputed rental value for primary and secondary residences.
• Restrictions on deductions for maintenance and mortgage interest (new quota-restrictive method).
• Introduction of a property tax on secondary residences at the cantonal level to relieve mountain regions.

Impact on Homeowners and Property Owners

For many owners, the abolition of the imputed rental value might initially seem like a financial relief, as self-occupied property will no longer count as taxable income. However, important tax deductions that previously benefited owners with high maintenance costs or mortgages will no longer be available.

Owners of secondary homes in tourist regions may be particularly affected, as they could face the new property tax. Additionally, the elimination of tax deductions might reduce the incentive to invest in property maintenance and energy efficiency, potentially impacting the market value of older properties in the long run.

What Can Property Owners Do Now?

Although there is no immediate need for action, homeowners should closely follow developments. It might be wise to bring forward planned renovations or significant maintenance work to take advantage of existing deduction opportunities. Additionally, analyzing your financial situation early on is recommended to prepare for potential tax changes.

How We Can Support You

As experienced mortgage brokers, we are here to help you adapt your financing to the new conditions. Whether you’re planning to buy a property or optimize your mortgage, we analyze your individual situation and present you with the best financing options.

Our mortgage experts can help you make the right decisions, even in a changing tax environment. Contact us today for a no-obligation consultation about your mortgage, and take advantage of our mortgage comparison service! Here you will find an overview of our services.