Mortgage Interest, Maintenance, and Renovation Costs: Which Deductions Are Possible?

Property owners in Switzerland benefit from various tax deduction options. In particular, mortgage interest and maintenance and renovation costs can be deducted from taxable income. Used correctly, these deductions significantly reduce the tax burden.

This article explains which costs are deductible, how the debt interest cap works, and what property owners should consider regarding maintenance and renovations.

Important note: On 28 September 2025, the Swiss electorate approved the abolition of the imputed rental value (Eigenmietwert) with 57.7% in favour. This means that deductions for maintenance costs and mortgage interest on owner-occupied property will also be eliminated in future. The new rules are expected to come into force no earlier than 2028. Until then, existing provisions remain unchanged. Details can be found in the section "Outlook: What Changes After the Abolition of the Imputed Rental Value?".

Mortgage Interest and Taxes (Current Law)

Deduction of Mortgage Interest

Mortgage interest can be fully deducted from taxable income. This significantly reduces the tax burden – especially with high mortgages.

Example: A property owner pays CHF 15,000 in annual mortgage interest. This amount can be directly deducted from taxable income.

Debt Interest Cap

At the federal level, the deductibility of debt interest is capped. Private debt interest is only deductible up to the amount of taxable investment income (e.g. interest, dividends, rental income) plus CHF 50,000. This is intended to prevent taxpayers from using excessive borrowing for tax optimization.

Example: A property owner has taxable investment income of CHF 10,000 and mortgage interest of CHF 80,000. At the federal level, they can deduct a maximum of CHF 60,000 (CHF 10,000 + CHF 50,000) in debt interest.

Maintenance and Renovation Costs (Current Law)

Basic Principle

Maintenance costs for properties can be deducted from taxable income, provided they serve to maintain the existing value of the property (value-maintaining).

Flat-Rate vs. Actual Costs

Property owners can choose anew each year between:

• Flat-rate deduction: In most cantons, 10% of the imputed rental value or rental income for buildings up to 10 years old, and 20% for older buildings.
• Actual costs: Deduction of actually incurred maintenance costs (with receipts such as tradesperson invoices).

Switching annually between the flat rate and actual costs is possible, allowing owners to choose the more favourable option each year.

Deductible Maintenance Costs (Value-Maintaining)

• Repairs and upkeep (e.g. roof repairs, heating service)
• Like-for-like replacement of installations (e.g. boiler, windows, kitchen – when replaced with comparable quality)
• Façade painting
• Garden maintenance or building cleaning
• Insurance premiums (building insurance)
• Management costs through external administrators
• Contributions to the renovation fund for condominium ownership

Value-Enhancing Investments (Not Deductible)

Investments that raise the standard or increase the property's value are not deductible for income tax purposes. However, they can be claimed as acquisition costs for capital gains tax purposes upon later sale. Examples:

• Adding a conservatory
• Converting an attic into living space
• Installing a luxury kitchen (additional cost compared to like-for-like replacement)
• Installing a swimming pool

Practical Distinction

The distinction between value-maintaining and value-enhancing is not always clear-cut in individual cases. A bathroom renovation, for example, may contain both value-maintaining and value-enhancing elements. In case of doubt, clarification with the tax authorities or a tax advisor is recommended.

Energy-Saving Renovations (Current Law)

Tax Benefits

Energy-efficiency measures are tax-deductible, even if they are partly value-enhancing. These include:

• Thermal insulation (façade, roof, basement ceiling)
• Solar systems (photovoltaic, solar thermal)
• Heat pumps
• Replacement of oil or gas heating with sustainable systems
• Window replacement with improved thermal insulation

Distribution Across Multiple Tax Periods

Since 2020, costs for energy-saving renovations and demolition costs for replacement buildings can be spread across up to three tax periods (the year of investment plus two subsequent years) if they exceed taxable income in the year of investment. This enables a more even tax relief for large investments.

Documentation and Records

For the tax office to accept the deductions, the following documents are important:

• Invoices from tradespeople (with breakdown into value-maintaining/value-enhancing if mixed work)
• Contracts with construction firms
• Proof of mortgage interest (bank statements, interest statements)
• Documentation for energy-saving renovations (e.g. GEAK expert confirmation)
• Receipts and payment confirmations

Outlook: What Changes After the Abolition of the Imputed Rental Value?

On 28 September 2025, the Swiss electorate approved the abolition of the imputed rental value. The new rules are expected to come into force no earlier than 1 January 2028. This system change has far-reaching implications for deduction options:

Owner-Occupied Property (After the Reform)

• Maintenance costs: No longer deductible – neither flat-rate nor actual costs. This applies at federal, cantonal, and municipal level.
• Mortgage interest: Generally no longer deductible.
• First-time buyer exception: Those buying their first owner-occupied property can claim a limited mortgage interest deduction for ten years (max. CHF 10,000 for married couples, max. CHF 5,000 for individuals, decreasing by 10% per year).
• Energy-saving and environmental measures: No longer deductible at the federal level. Cantons may maintain their own deduction options until 2050 at the latest.
• Heritage conservation work: Remains deductible at the federal level.
• Contributions to the renovation fund: No longer deductible after the system change.

Rented and Leased Properties (After the Reform)

• Maintenance costs: Still deductible as before.
• Debt interest: Still deductible, but only under the proportional-restrictive method (in proportion to the value of rented properties relative to total assets).

Recommendation for the Transitional Period

• Carry out planned value-maintaining renovations and energy-saving improvements before the new rules take effect, to take advantage of tax deductions.
• Use contributions to the renovation fund for condominium ownership for tax purposes during the transitional period.
• Distribute renovation costs across multiple tax years to optimize deductions.
• Review and potentially adjust the mortgage structure.
• Continue to document value-enhancing investments carefully, as they remain deductible for capital gains tax upon later sale.

Practical Examples

Example 1: Mortgage Interest and Flat-Rate Deduction (Current Law)

A property owner pays CHF 12,000 in mortgage interest. Additionally, he uses the 20% flat-rate deduction on his imputed rental value of CHF 15,000, i.e. CHF 3,000. In total, he can deduct CHF 15,000 from taxable income. Since his imputed rental value is also CHF 15,000, the deductions and the imputed rental value practically offset each other.

Example 2: Renovation with Actual Costs

A family renovates their bathroom for CHF 25,000. Of this, CHF 18,000 is classified as value-maintaining (deductible) and CHF 7,000 as value-enhancing (not deductible for income tax, but claimable as acquisition costs for capital gains tax upon later sale).

Example 3: Energy-Saving Renovation with Distribution

A homeowner invests CHF 60,000 in a solar system and thermal insulation. Since his taxable income cannot fully absorb the deductions in the first year, he distributes the costs across three tax periods: CHF 20,000 in the first year, CHF 20,000 in the second year, and CHF 20,000 in the third year.

Example 4: First-Time Buyer After the Reform (from 2028 at the Earliest)

A young married couple buys their first home in 2029. They do not need to declare an imputed rental value. In the first year, they can deduct up to CHF 10,000 in mortgage interest. This amount decreases by 10% each year, i.e. CHF 9,000 in the second year, CHF 8,000 in the third year, and so on. Maintenance costs can no longer be deducted.

Common Mistakes and Tips

Common Mistakes

• Confusing value-maintaining and value-enhancing costs.
• Not keeping receipts for maintenance work.
• Assuming that all modernizations are deductible.
• Ignoring the debt interest cap at the federal level.
• Forgetting that value-enhancing investments are deductible for capital gains tax purposes.
• Ignoring the transitional deadlines regarding the abolition of the imputed rental value.

Tips

• Before major renovations, clarify which costs are value-maintaining (tax-deductible) and which are value-enhancing (not deductible).
• Compare the flat-rate deduction and actual costs annually and choose the more favourable option.
• Plan energy-efficiency measures strategically, as they receive special tax benefits – especially during the transitional period before the reform.
• Carry out renovations and improvements before the new rules take effect where possible.
• Keep all receipts and invoices carefully – both for current tax deductions and for potential future capital gains tax.
• Distribute deductions across multiple tax years to maximize the tax benefit.

Conclusion

Property owners in Switzerland have significant opportunities to reduce their tax burden through the deduction of mortgage interest, maintenance and renovation costs. It is crucial to understand the rules on the debt interest cap and the distinction between value-maintaining and value-enhancing investments.

With the approved abolition of the imputed rental value, a fundamental system change lies ahead: most deduction options for owner-occupied property will be eliminated. Until the new rules come into force (expected no earlier than 2028), existing provisions remain unchanged. Property owners should use the transitional period to carry out planned renovations and energy-saving improvements and to optimize their tax situation.