News Taxes

The imputed rental value will be abolished

With its decision last autumn, the Swiss electorate voted to abolish the taxation of the imputed rental value. This fundamentally changes a key element of the existing taxation of homeownership. Properties held as private assets are particularly affected.

The Federal Council has announced that the new provisions are expected to enter into force no earlier than 1 January 2028. It intends to decide on the exact date in the second quarter of 2026. However, since cantonal legislation must also be amended, this timeline appears ambitious. Nevertheless, even in the short term there are aspects that should be considered for optimal tax planning.

The reform does not simply abolish the imputed rental value. Since no income from owner-occupied property will be taxed, the deduction for maintenance costs, including investments in energy-saving measures, will also be abolished. Cantons will have the option to continue allowing deductions for such energy-related investments at the cantonal level. This option will be limited in time until the objective of a balanced greenhouse gas balance has been achieved, but no later than 2050. It remains to be seen which cantons will make use of this option. For rented properties, maintenance costs may still be claimed either as a lump sum or based on the effective costs.

Cantons do not have discretion regarding the new rules on the deduction of interest on debt. Across Switzerland, once the new law enters into force, debt interest (not only mortgage interest) will only be deductible in proportion to the share of assets consisting of non-owner-occupied Swiss real estate relative to total assets. Anyone who owns only self-occupied residential property will no longer be able to deduct any debt interest. It is irrelevant whether such interest arises from a mortgage, a consumer loan, a private loan, or similar financing.

In order to continue fulfilling the constitutional mandate of promoting homeownership, a first-time buyer deduction will be introduced for direct federal tax as well as cantonal and municipal taxes. Individuals who purchase a permanently and exclusively owner-occupied property for the first time may deduct debt interest attributable to the property of up to CHF 10,000 for married couples and CHF 5,000 for all other taxpayers in the first tax year. This deduction will decrease linearly by 10% each year thereafter.

Cantons will also be given the option to introduce a special property tax on predominantly self-used second homes. This measure is intended in particular to ease the fiscal burden on cantons with a large number of second homes (holiday houses and apartments). At present, it is unclear which cantons will make use of this option and what the level of such a special tax would be.

Where previously the imputed rental value (for owner-occupied property) or rental income (for rented property), as well as maintenance costs including investments in energy-saving measures, had to be declared, the revised rules will require a distinction between owner-occupied and rented properties once the reform enters into force. In addition, the tax consequences for cantonal and municipal taxes may differ from those for direct federal tax.

Until this reform enters into force, there may be a temptation in condominium associations to increase the deductible contributions to the renovation fund. Caution is advisable here. If contributions are significantly increased compared with previous years without a justified and demonstrable need, there is a risk that the tax authorities may consider this an impermissible tax avoidance arrangement and deny the deduction. However, if higher contributions are justified by concrete planned or upcoming maintenance work and properly documented, the deduction remains permissible. The Canton of Lucerne, by way of a safe-haven rule, generally considers annual contributions of up to 1% of the building’s insurance value to be acceptable.

It should also be noted that these changes do not affect real estate capital gains tax. In this context, only value-enhancing costs remain deductible as investment costs. The distinction between maintenance and value enhancement continues to be made based on objective technical criteria. Careful documentation of investments — including detailed invoices, plans, construction descriptions, and before-and-after photographs — therefore remains increasingly important.

Although many aspects are already clear, a number of questions remain open. In particular, situations involving mixed-use properties, preferential rents, changes in use within a tax period, as well as replacement purchases for a first home or the ownership of income-generating properties, require individual assessment.

If you have any questions regarding the taxation of real estate, our Tax Managers for Private Clients, Barbara Bucher and Carmen Hofmann will be happy to assist you.

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Barbara Bucher, March 2026