Real Estate as Assets: How Residential Property Is Taxed in Switzerland

Purchasing real estate is considered an important form of wealth accumulation in Switzerland. However, property ownership brings not only advantages but also tax obligations – and Swiss residential property taxation is on the verge of its biggest reform in decades.

This article explains how real estate is currently taxed in Switzerland, what will change with the historic change of system, and how to make the most of the transition period.

Important note: The Swiss electorate approved the abolition of the imputed rental value on 28 September 2025 with 57.7% in favour. The new rules will take effect at the earliest on 1 January 2028 (date to be determined by the Federal Council). Until then, the current rules remain fully in force. This article covers both current law and new law from 2028. (As of: tax period 2025)

Fundamentals of Real Estate Taxation (Current Law Until at Least 2027)

Tax Object and Owner Obligations

Swiss real estate is subject to two types of tax:

• Income tax: Owner-occupied properties are taxed via the imputed rental value; rented properties via rental income
• Wealth tax: All properties must be declared as assets; wealth tax is levied exclusively by cantons and municipalities

All owners are required to declare their properties in the annual tax return – regardless of whether they live in them or rent them out.

Imputed Rental Value: Tax Liability for Owner-Occupied Property (Until at Least 2027)

What Is the Imputed Rental Value?

Anyone who lives in their own apartment or house must declare a notional income – the so-called imputed rental value – as taxable income. It is intended to tax the economic benefit of living rent-free and is based on Art. 21 para. 1 lit. b DFTA.

Level of Imputed Rental Value

The imputed rental value is generally set at 60% to 70% of the market rent of a comparable property. The precise calculation is carried out by the cantonal tax authorities, and the methodology differs between cantons.

Important: The imputed rental value applies not only to the primary residence but also to secondary residences (holiday homes, vacation apartments). For holiday properties, it may be reduced proportionally to actual usage.

Foreign Properties and the Imputed Rental Value

For foreign owner-occupied properties, the imputed rental value is not directly taxed in Switzerland, but has a rate-setting effect: it increases the applicable tax rate on other Swiss-source income (progressive rate effect). From 2028, this rate-setting effect of foreign imputed rental values will also be abolished.

Taxation of Rented Properties

Rental Income as Taxable Income

All rental income from letting properties in Switzerland must be declared in full as taxable income. This applies to both private and commercial tenancies.

Deductions for Rented Properties (Also Applicable After 2028)

Owners of rented properties may deduct the following costs:

• Maintenance and renovation costs (flat-rate or actual costs, see below)
• Mortgage interest (from 2028 onwards only on a proportional basis, see below)
• Management costs (property management fees)
• Insurance premiums (building insurance, etc.)

Real Estate and Wealth Tax

Valuation: Tax Value vs. Market Value

Properties are entered in the tax return at the cantonal tax value. This is generally lower than the current market value and is determined by the cantonal tax authorities, with periodic adjustments.

Important: Wealth tax on real estate is levied exclusively by cantons and municipalities – there is no federal wealth tax on private assets.

Foreign Properties

Foreign properties must be declared. They are not taxed directly in Switzerland, but increase the applicable tax rate on Swiss-source income and assets through the progressive rate effect. This generally remains in place after the reform (except for the imputed rental value component).

Deductions for Property Owners (Current Law Until at Least 2027)

Mortgage Interest (Debt Interest Deduction)

Mortgage interest may currently be deducted from taxable income in full, up to the amount of taxable investment income plus CHF 50'000 (Art. 33 para. 1 lit. a DFTA). This deduction applies equally to owner-occupied and rented properties.

From 2028 (new law): The general debt interest deduction will be fundamentally restructured (see section "New Law from 2028").

Maintenance Costs

Property owners may choose between:

• Flat-rate deduction: Based on the age of the property:
  • Up to 10 years old: 10% of imputed rental value (or rental income)
  • Over 10 years old: 20% of imputed rental value (or rental income)
  • Cantons may set different flat rates
• Actual costs: Documented expenses (tradesmen's invoices, renovations, replacement installations)

Both methods should be compared; actual costs are usually more advantageous in years with significant renovation work.

Energy-Efficient Renovations

Costs for energy-saving renovations (e.g. thermal insulation, window replacement, heat pumps, solar installations) are separately deductible and may be spread over two consecutive tax periods, allowing for tax smoothing on large investments.

From 2028 (federal tax): This deduction will no longer be available for owner-occupied properties at the federal level. Cantons may retain it until 2050 – whether they do, and to what extent, varies by canton.

Heritage Preservation

Costs for heritage preservation work remain deductible after 2028 at both federal level (Art. 32 DFTA) and cantonal level.

The System Change from 2028: What Will Change?

On 28 September 2025, the Swiss electorate voted with 57.7% in favour to abolish the imputed rental value for owner-occupied primary and secondary residences. The rules take effect at the earliest from 1 January 2028, with the Federal Council determining the precise date.

Overview: Current Law vs. New Law

AspectUntil at least 2027 (current law)From earliest 2028 (new law)Imputed rental valueTaxable incomeAbolished completely (primary and secondary residences)Mortgage interest (owner-occupied)Fully deductibleNo longer deductibleMaintenance costs (owner-occupied)Deductible (flat-rate or actual)No longer deductibleEnergy renovations (owner-occupied, federal)DeductibleNo longer deductible (cantons may allow until 2050)Heritage work (owner-occupied)DeductibleRemains deductibleMaintenance costs (landlords)DeductibleRemains fully deductibleMortgage interest (landlords)DeductibleDeductible, but proportional onlyWealth taxCantonal, based on tax valueUnchangedFirst-time buyer deductionNot availableNewly introduced (max. CHF 10'000 / 5'000, degressive)Special property tax on secondary residencesNot availableCantons may introduce

What Specifically Disappears (Owner-Occupied Properties)

From 2028, the following deductions will no longer be available for owner-occupied primary and secondary residences at federal level:

• Mortgage interest
• Maintenance and renovation costs
• Energy efficiency and environmental measures
• Demolition costs prior to replacement construction

New Debt Interest Deduction: Proportional Restriction Method (for Landlords)

Those who hold rented properties may still deduct mortgage interest – but only proportionally. The calculation is:

Deductible interest = Total mortgage interest × (Value of rented properties ÷ Total assets)

Example: Total assets CHF 1'500'000, of which rented property CHF 500'000 (= 1/3). Total mortgage interest CHF 30'000 → Deductible: CHF 10'000.

New: First-Time Buyer Deduction

To offset the loss of the mortgage interest deduction, first-time buyers of owner-occupied residential property receive a new, time-limited deduction:

• Married couples/registered partners: Max. CHF 10'000 in the first year after purchase
• Single persons: Max. CHF 5'000 in the first year
• Degressive over 10 years (linear reduction of 10% per year)
• One-time deduction, which continues to run even if the property is changed

New Cantonal Property Tax on Secondary Residences

Cantons will have the option (but not the obligation) to introduce a special property tax on predominantly owner-occupied secondary residences. This primarily affects tourism and mountain cantons. Whether and how a canton introduces such a tax remains to be determined.

Strategic Recommendations for the Transition Period (Until 2028)

The period until the new rules come into force offers important planning opportunities:

• Bring forward renovations: Value-preserving maintenance work already planned should be carried out before 2028 to make use of current deductibility
• Plan energy investments: Major investments (heat pumps, façade insulation, PV systems) can be spread over two tax periods – a last opportunity for tax optimisation
• Contributions to renovation funds: For condominium owners: contributions to the renewal fund can still be deducted until the system change
• Rethink mortgage strategy: After 2028, there is no incentive to maintain a high mortgage for owner-occupied properties; reconsider amortisation strategy
• Individual advice: Impacts depend strongly on individual circumstances (debt level, renovation plans, retirement planning); professional tax advice is recommended

Practical Examples

Example 1: Owner-Occupied Property (Current Law Until 2027)

An owner lives in a condominium in Zurich with an imputed rental value of CHF 18'000. Mortgage interest amounts to CHF 12'000 per year. In the 2025 tax return:

• Income: + CHF 18'000 imputed rental value
• Deductions: − CHF 12'000 mortgage interest, − CHF 3'600 maintenance (flat rate 20% of CHF 18'000)
• Net tax burden from property: CHF 18'000 − CHF 15'600 = CHF 2'400

Example 2: Owner-Occupied Property (New Law from 2028)

Same owner, same property – but from tax period 2028 onwards:

• Imputed rental value: Abolished
• Mortgage interest deduction: Abolished
• Maintenance deduction: Abolished
• Net tax burden from property: CHF 0 (no income component remaining)

For a debt-free owner, this represents a clear tax saving. For owners with a high mortgage (and previously high deductible interest), the old system may have been more favourable.

Example 3: Rented Property (Rules Largely Unchanged)

A couple rents out a house in Basel for CHF 36'000 per year. They pay CHF 10'000 in mortgage interest. Total assets are CHF 1'200'000, of which the rented property accounts for CHF 600'000 (50%).

• Income: + CHF 36'000 rental income
• Maintenance deduction: − CHF 7'200 (flat rate 20% of CHF 36'000)
• Mortgage interest (from 2028, proportional): CHF 10'000 × 50% = − CHF 5'000 (previously: − CHF 10'000)
• Net taxable income: CHF 23'800 (from 2028) vs. CHF 18'800 (current law)

Example 4: First-Time Purchase from 2028

A couple purchases their first home in 2028. Mortgage interest amounts to CHF 15'000 per year.

• First-time buyer deduction Year 1: CHF 10'000
• First-time buyer deduction Year 2: CHF 9'000 (−10% per year)
• First-time buyer deduction Year 10: CHF 1'000
• From Year 11: No further deduction available

Common Mistakes and Tips

Common Mistakes

• Planning as if the imputed rental value will continue to exist: It will be abolished at the earliest from 2028; current law applies until then
• Assuming owner-occupied property is currently tax-free: Incorrect – the imputed rental value and any cantonal charges currently apply
• Not declaring foreign properties: Declaration obligation applies to properties abroad as well
• Claiming maintenance costs without documentation: Invoices must be retained if claiming actual costs
• Postponing renovations until after 2028: Those planning renovations will lose tax deductibility once the system changes
• Confusing old and new law: Deduction possibilities differ fundamentally depending on the applicable tax period

Tips

• Act now: Implement planned renovations and investments before the system change
• Compare flat-rate vs. actual costs: Evaluate both methods annually
• Use the cantonal tax value: The official tax value is the relevant benchmark for wealth tax
• Retain maintenance receipts: For at least 10 years
• Plan renewal fund contributions: Deductible for condominium owners until the system change
• Seek individual tax advice: Impacts of the system change are highly situation-dependent – especially for landlords, highly leveraged owners and those approaching retirement

Summary

Real estate ownership in Switzerland is tax-complex – and will become even more so with the impending system change. The referendum result of 28 September 2025 marks a historic turning point: the imputed rental value will be abolished, but so will key deductions for owner-occupiers.

During the transition period until at least 2028, careful planning is advisable: renovations already planned should be brought forward, as should contributions to renewal funds. Landlords retain their deduction options substantially, but must factor in the new proportional restriction method for mortgage interest.