How do I tax my owner-occupied property in Switzerland?

Anyone who owns a self-occupied property must pay tax on the so-called imputed rental value as fictitious income. At the same time, mortgage interest and maintenance costs can be deducted from taxes.

IMPORTANT: On September 28, 2025, the Swiss electorate approved the abolition of imputed rental value with 57.7% YES votes. Implementation will take effect at the earliest on January 1, 2028. Until then, the regulations described below remain unchanged.

What is Imputed Rental Value?

Definition

Imputed rental value corresponds to a fictitious rent that owners could achieve if they rented out their residential property. Self-occupiers must declare this value as income for tax purposes.

Legal Basis

The Federal Act on Direct Federal Tax defines in Article 21 that income from immovable property is taxable. This includes "the rental value of properties or parts of properties that are available to the taxpayer for personal use based on ownership or a free right of use".

Tax System

Expressed in Swiss francs, the imputed rental value corresponds to approximately 60 to 70 percent of the amount a tenant would have to pay annually for the residential property. The Federal Supreme Court has set the imputed rental value at a minimum of 60 percent and a maximum of 70 percent of the market rent.

Calculation of Imputed Rental Value

Basic Principle

According to the Federal Supreme Court, the imputed rental value must be at least 60 percent and may not exceed 70 percent of the market rent. It is determined by the cantonal tax authority.

Cantonal Differences in Calculation

Canton of Zurich:

• Single-family houses: 3.5% of the wealth tax value
• Apartments: 4.25% of the wealth tax value
• Self-occupied apartments in multi-family houses: 70% of market rents

Canton of Bern:The imputed rental value is determined individually for each property as part of the official valuation. First, the so-called protocol rental value is determined based on the individual characteristics of the property, which is then adjusted to the rent level using a comparison procedure.

Canton of Lucerne:The imputed rental value is 70% of market rents.

Canton of St. Gallen:The imputed rental value is 70% of the market rent.

Canton of Thurgau:The imputed rental value for self-occupied properties is 60% of the indexed rental value.

Canton of Solothurn:The imputed rental value is 8 to 11% of the cadastral value for buildings of average construction. For buildings of above-average construction, the imputed rental value is determined individually.

Valuation Factors

The imputed rental value is determined by the responsible cantonal tax authority. In their assessment, they consider criteria such as:

• Living space
• Location
• Year of construction
• Construction method
• Amenities
• Condition of the property

Tax Deductions

Mortgage Interest

Mortgage interest can be fully deducted from taxable income. For direct federal tax, mortgage interest can be deducted up to an amount of CHF 50,000 above taxable wealth income, which is almost never reached in practice.

Maintenance Costs

In most cantons, maintenance costs can be declared either:

• As a lump sum (as a percentage of the imputed rental value) or
• Based on actual costs (with receipts)

Deductible maintenance costs:

• Repairs and renovations
• Maintenance work
• Administrative costs
• Insurance premiums (building and contents insurance)
• Ancillary costs (to the extent not consumed by the owner)

Non-deductible costs:

• Value-adding investments (new kitchen, extension)
• Private ancillary costs (electricity, gas, water for personal consumption)

Practical Example

Calculation with High Debt

Self-occupied property, market value CHF 1 million, mortgage CHF 800,000 at 2% interest, marginal tax rate 35%:

• Imputed rental value: +CHF 18,000
• Mortgage interest (800,000 × 2%): -CHF 16,000
• Maintenance costs: -CHF 2,800
• Net additional burden: +CHF 3,200
• Additional taxes (35%): +CHF 1,120

Calculation with Low Debt

Homeowners who have significantly amortized or even fully paid off their mortgage are more disadvantaged. If the mortgage is only CHF 200,000:

• Imputed rental value: +CHF 18,000
• Mortgage interest (200,000 × 2%): -CHF 4,000
• Maintenance costs: -CHF 2,800
• Net additional burden: +CHF 11,200
• Additional taxes (35%): +CHF 3,920

Who is Affected?

Primary Residence

Imputed rental value must be taxed for:

• Self-occupied residential property
• Free use by family members in the same household (spouse and children)
• Usufructuaries who use the property free of charge
• Those with residential rights who use the property free of charge

Second Homes and Vacation Properties

Vacation homes and vacation apartments must also be taxed. Since January 1, 2011, only the higher rental value applies for direct federal tax. The higher imputed rental value is intended as an incentive to rent out the vacation apartment that is not used personally.

Vacant Properties

Property owners who, for example, take up a position in another city must continue to pay tax on the imputed rental value for their house, even if they no longer live there. There are only two exceptions:

• They can credibly demonstrate that they have tried to sell or rent the property
• The property is in such poor condition that it can neither be sold nor rented

Hardship Regulations

Cantons with Hardship Clauses

In the cantons of Geneva, Graubünden, Lucerne, Obwalden, Schaffhausen, St. Gallen, Vaud, and Zurich, there are hardship clauses for property owners with low income, such as retirees.

Conditions for Hardship Cases

If the imputed rental value exceeds a certain percentage (usually one-third) of income, it is reduced. In Lucerne and St. Gallen, however, it may not fall below 60 percent.

Reduction of Imputed Rental Value

Underutilization

If housing needs change and rooms become newly unused, you may be able to claim a lower imputed rental value. In practice, this is possible, for example, when a child moves out or in the event of a divorce.

Requirements for reduction:

• Rooms must actually no longer be used
• No use as a guest room or hobby room
• No entitlement to reduction for vacation apartments

Objection to Imputed Rental Value

Tax authorities periodically reassess the imputed rental value. In case of an increase, you have the option to object:

• Objection is free of charge
• Court proceedings can be expensive (expert opinions cost several thousand francs)
• Prospects of success are limited, especially with general market adjustments

Tax Implications

Who Benefits from the Current System?

This tax system fundamentally favors homeowners who are highly indebted because they can deduct more debt interest.

Who is Disadvantaged?

Homeowners whose debt interest and maintenance costs combined are lower than the imputed rental value are at a disadvantage. Their income taxes are higher than if they did not own a house.

Interest Rate Dependency

However, in times of very low mortgage interest rates, this is usually also the case for highly indebted homeowners.

Additional Taxes on Real Estate

Multiple Taxation

Residential property in Switzerland is taxed multiple times:

• Wealth tax: The value as taxable wealth
• Imputed rental value: As taxable income
• Property tax: More than half of the cantons levy 0.1 to 0.3% of the property value
• Real estate capital gains tax: On sale with profit

Deductions as Compensation

In return, the following can be deducted:

• Mortgage debt from wealth
• Mortgage interest from income
• Maintenance costs from income

Abolition of Imputed Rental Value – Current Status

Referendum of September 28, 2025

On September 28, 2025, the Swiss electorate approved the abolition of imputed rental value with 57.7% YES votes (with 49.5% voter turnout).

Voting results:

• YES votes: 57.7%
• NO votes: 42.3%
• Voter turnout: 49.5%

What Was Decided?

The vote included two proposals that were legally linked:

1. Federal Act on the System Change in Residential Property Taxation (legislative proposal)
2. Cantonal Property Taxes on Second Properties (constitutional amendment)

Both proposals were accepted, allowing the reform to come into force.

Entry into Force

The new regulation will come into force at the earliest on January 1, 2028. The Federal Council will determine the exact date based on the recommendation of the Federal Department of Finance. Until then, the previous regulations remain unchanged.

What Changes After Abolition?

Eliminated:

• Imputed rental value for self-occupied residential property at the primary residence
• Maintenance deductions for primary residences (for the federal government and most cantons)
• Mortgage interest deduction for primary residences (with exceptions, see below)

Newly possible:

• Mortgage interest deduction for first-time acquisition (initial purchase of a self-occupied property)
• Mortgage interest deduction for rented/leased properties (quota-restrictive method)
• Cantons can levy property tax on second homes

Second properties:

• Remain taxable
• Cantons can introduce special property tax

Transition Strategy Until 2028

Short-term Measures

Until the abolition is implemented, you should:

• Maximize all deductions: Fully claim mortgage interest and maintenance costs
• Optimize maintenance work: Complete planned repairs and renovations before 2028
• Review itemized deduction: Compare actual costs vs. lump sum
• Document underutilization: In case of changed housing circumstances
• Condominium ownership: Maximize contributions to renewal funds (still tax deductible)

Expected Renovation Boom

Experts expect a short-term boom in renovations:

• Many owners will bring forward planned renovations
• Demand for craftsman services will increase sharply
• Prices for craftsman work could rise

Medium-term Strategies

• Mortgage strategy: Reconsider optimal debt level considering affordability
• Energy renovations: Still benefit from tax deductions now
• Professional advice: Consult tax advisor for individual situation

Long-term Planning

• Amortization strategy: Re-evaluate direct vs. indirect amortization
• Sales timing: Consider real estate capital gains tax
• Succession planning: Tax-optimal transfer to next generation

Avoiding Common Mistakes

Documentation

☑ Incomplete receipts: Systematically collect all maintenance costs
☑ Incorrect categorization: Distinguish between value-adding and maintenance
☑ Missing evidence: Especially for actual costs

Tax Planning

☑ Ignoring timing: Optimally distribute repairs and investments
☑ Lump sum vs. actual: Choose best option annually
☑ Interest strategy: Balance tax vs. financial optimization

Practical Tips

Record Keeping

• Digital recording: Apps and software for cost tracking
• Categorization: Clear separation between maintenance and value-adding
• Long-term archiving: 10-year retention obligation

Annual Planning

• Cost forecast: Budget for maintenance work
• Tax optimization: Distribute expenses to favorable years
• Professional support: Seek advice in good time

Conclusion

The taxation of self-occupied properties in Switzerland is based on imputed rental value as fictitious income (60-70% of market rent), with mortgage interest and maintenance costs being deductible.

Key points:

• Currently valid: Imputed rental value must be taxed as income
• Deductions: Mortgage interest and maintenance costs fully deductible
• Cantonal differences: Various calculation methods
• Disadvantage: Especially with low interest rates and low debt

Abolition approved:

• Date of vote: September 28, 2025
• Result: 57.7% YES votes
• Entry into force: At the earliest January 1, 2028
• Until then: Previous regulations remain unchanged

Recommendation for action:Make optimal use of the transition period until 2028 to still benefit from existing tax deductions. In particular, you should bring forward planned renovations and maintenance work.

The current system favors highly indebted owners and disadvantages those with low debt or paid-off mortgages. The approved abolition will fundamentally change this situation.