Abolition of the imputed rental value – What now?

SYSTEM CHANGE IN HOME OWNERSHIP TAXATION

In the popular vote of 28 September 2025, the Swiss voters approved the abolition of the imput-ed rental value taxation with 57.7% of votes in favour. According to initial announcements, the effective end of the imputed rental value taxation is not expected before 2028. The abolition of the imputed rental value entails the following changes:

Against this background, the question arises as to how existing or future property ownership can be optimized for tax purposes and which measures can be taken before the end of the imputed rental value taxation. One thing is clear: there is no universally valid answer – each case has to be examined individually. The following outlines some potential levers that can be considered.

TIMELY REALISATION OF EXTENSIVE RENOVATIONS

In view of the end of the imputed rental value taxation and the deductibility of property mainte-nance costs, it is advisable to promptly carry out any renovations and maintenance work. Since the Federal Council intends to implement the reform for the 2028 tax period, the window for deductible work is still open. Whether the reform will effectively come into force as early as 2028 has not yet been definitively determined. Property owner should, however, use this horizon as a guide.

REDUCING INTEREST BURDEN

A core element of the systemic change is the new regulation of the deduction for interest. Cur-rently, private interest on dept can be deducted up to the amount of taxable capital income, plus an additional CHF 50,000 from income. The new rules stipulate that private debt interest is only deductible in proportion of all non-owner-used properties located in Switzerland to total assets. In other words, interest deduction is only possible for properties that are rented or leased out and located in Switzerland. Foreign rental properties are considered as other assets. For first-time acquisitions of permanently and exclusively self-used residential property, a limited deduc-tion for interest on dept is provided both in terms of duration and amount.

In individual cases, it should therefore be examined whether amortization of mortgage debt is advisable to reduce unused interest deductions for tax purposes. If the funds and sufficient income are available, refinancing with a reduced loan at the same financial institution may also be considered. In this case, an early repayment penalty usually applies. For tax purposes, this is treated as interest and is therefore generally deductible. At the same time, reducing the mort-gage leads to a sustainably lower interest burden after the abolition of the imputed rental value taxation.

PROPERTY COMPANY AS AN ALTENATIVE

With the elimination of the deduction for maintenance costs and the limited deductibility of pri-vate interest on dept, the question arises whether holding property through a real estate compa-ny could, in certain cases, represent a more tax-efficient alternative.

If a self-used property is held in a dedicated real estate company, the company must be paid a market-based rent. This rent is generally significantly higher than the previous imputed rental value. Unlike the taxation of individuals, legal entities can fully claim both maintenance and fi-nancing costs as expenses. If these costs are roughly equivalent to the rental income, the com-pany will have little or no taxable profit. Any excess costs can also be carried forward to subse-quent periods.

Due to the market-based rent, a real estate company is usually not worthwhile for self-used properties. An exception may apply for particularly maintenance-intensive properties or combina-tions with other income-generating properties. The situation is different for fully or partially rent-ed properties: here, genuine rental income is generated, so holding them trough a real estate company could lead to tax savings. This is because interest is fully deductible and not subject to proportional limitation, as illustrated in the following example. Attention must also be paid to taxes on dividends from the company as well as to property gain tax in the event of transfer. Whether a real estate company is nevertheless worthwhile must be assessed on a case-by-case basis. 

Example:

A property generates annual rental income of CHF 60,000. It carries mortgage debt with annual interest of CHF 35,000, and maintenance costs amount to an additional CHF 15,000.

• Privately held:

Assuming a ratio of 1/3 (= value of rented or leased properties / total assets), only CHF 11,667 of the CHF 35,000 interest on debt is deductible. The maintenance costs of CHF 15,000 remain fully deductible for rented property. This results in taxable income of:

CHF 60,000 – CHF 11,667 – CHF 15,000 = CHF 33,000

(previously: CHF 60,000 – CHF 35,000 – CHF 15,000 = CHF 10,000)

• Held in a real estate company:

The company records the same rental income (CHF 60,000) and can fully deduct both the interest on dept (CHF 35,000) and maintenance costs (CHF 15,000). The remaining taxable profit amounts to:

CHF 60,000 – CHF 35,000 – CHF 15,000 = CHF 10,000

IMPLICATIONS FOR PROPERTY GAINS TAX

Unchanged is the rule that deductible investment costs include, in addition to the acquisition price, only value enhancing costs. Maintenance costs remain non-deductible for property gains tax purposes. Therefore, the key factor remains the distinction between value-preserving and value-enhancing expenditures. Property owners are strongly advised to document all costs re-lated to the property comprehensively, to claim deductible capital expenditures as fully as possi-ble in the event of a sale or replacement acquisition.

With the abolition of the deductibility of maintenance costs, the trend will probably be to classify such expenses as value-enhancing and thus as investment costs for the purposes of property gains tax. It should be noted, however, that the cantons may continue to allow the deductibility of costs for energy-efficient renovations or measures to preserve historical monuments. Whether and to what extent the cantons will allow such deductions is currently unclear. The deductibility of energy-efficient renovation measures – if provided for by the canton – is limited to the year 2050, unless the greenhouse gas balance can be offset before then. At federal level, it will no longer be possible to deduct the costs of energy-efficient renovation measures for tax purpos-es. However, the costs of measures to preserve historical monuments will remain deductible at federal level.

CONCLUSION

The abolition of the imputed rental value taxation represents a fundamental paradigm shift in Swiss tax law. Property owners are now faced with new conditions: the deduction for interest will be significantly restricted, maintenance costs are no longer deductible for self-used properties, and cantonal differences regarding energy-related renovations or monument preservation may create additional uncertainty.

Specifically, this currently means

• Timely realize renovation work – As long as maintenance costs are still deductible, pending work should timey be carried out.
• Optimize financing – Consider amortization or refinancing to reduce unused interest deductions for tax purposes.
• Reconsider holding structures – A real estate company may be worthwhile in the case of rented or maintenance-intensive properties.
• Ensure documentation (still) – Record all expenditures carefully to secure advantages for property gains tax purposes.
• Monitor cantonal developments – Especially regarding energy-related measures and additional taxes.

There is no universal solution. What remains decisive is a careful case-by-case analysis. Those who act early can secure planning opportunities and sustainably optimize their tax burden.