Abolishing imputed rental value: A good outlook for owners?

I couldn't help but wonder: will property owners in Switzerland soon be able to enjoy a better (tax) outlook...?

As if there wasn't already enough to consider when buying your own home in terms of location, size and so on - in Switzerland, you also have to think about imputed rental value. This is a fictitious income where a tax is levied on owners of residential property. Many Swiss people want to abolish the imputed rental value because the system is not exactly fair today. We take a look at the current situation regarding the abolition of imputed rental value and what this means for you.

Perhaps you will soon be able to concentrate fully on the view from the window of your own home instead of nervously looking at your tax return.

A panoramic view of the imputed rental value

The imputed rental value feels a bit like building your dream home - just as someone puts up a wall right outside your window. As happy as owners are about their own property, the notice of imputed rental value flutters through the door just as quickly.

The imputed rental value counts as part of the taxable income. It is calculated differently depending on the canton. The assessment is made at the time of purchase and in most cases is hardly ever adjusted later. Like any other income tax, imputed rental value can be reduced through deductions: for example, through value-preserving investments in your property.

You can read more details about imputed rental value  here. Or simply ask us directly -after all, that's what we're here for as tax experts. We can not only explain the tax to you in detail, but also the tax-reducing measures.

Why many want to abolish the imputed rental value

Many owners have long wished to finally tear down this annoying wall in front of their window. They want to abolish the imputed rental value because they feel it is unfair. And it is, at least to new owners.

Since the imputed rental value is calculated when the property is purchased and is hardly changed later in most cantons, many house or flat owners have been paying almost the same for decades. The value of their property has of course increased in the meantime. So anyone who buys a comparable home today is assessed at a significantly higher rate.

This really isn't fair. And it is why the canton of Zurich, for example, has announced that it will recalculate all imputed rental values, which in turn would lead to a significantly higher tax burden for long-standing property owners.

The long road to abolishing the imputed rental value

Anyone hoping for a quick abolition has not taken the Swiss tax system into account. Swiss tax system system. The wall is not being torn down, but rather removed stone by stone. But after a long discussion, something is finally moving. At the end of 2024, parliament passed a bill to completely abolish the imputed rental value. No referendum was held against it.

Cantons with many secondary properties want to amend the constitution and allow a ‘property tax’ on secondary properties instead of the imputed rental value. This mainly affects popular holiday regions in the mountains. A referendum on precisely this constitutional amendment will be held on 28 September 2025, which should finally pave the way for the abolition of the imputed rental value.

When will the imputed rental value be abolished at the earliest?

So things are moving - we can see the first rays of light through the wall. But even after the vote, it will still take some time before the imputed rental value is actually abolished. With a “yes” from the people, the Federal Council can finalise the law.

The imputed rental value will almost certainly not be abolished before 2028. It will therefore take some time until the wish of many owners can be fulfilled. 

UPDATE: The people say "yes" to the abolition of the imputed rental value!

The people have said yes and want to abolish the imputed rental value. This is good news for anyone who lives in their own four walls - or wants to do so in the future. However, it may also be worth investing in a property in need of renovation now.

So read on before you pop the corks. Or simply give us a call so that we can celebrate together and talk about your situation. Because the clear answer from the people raises new tax questions, which we are happy to answer.

Abolishing the imputed rental value - an outlook

So we are eagerly waiting for the wall outside our window to be torn down. But what is actually behind it? Are we suddenly looking at a lake, a beautiful mountain panorama - or is the next wall just a few centimetres away? It all depends on who you ask.

Good prospects for owners

Homeowners who have recently moved into their own home have the best outlook. They are most affected by the imputed rental value as their property has only recently been categorised. For them, the abolition of the imputed rental value is likely to have a positive impact. Not only in terms of tax, but perhaps also on the state of mind, because an injustice has been abolished.

Less income for the state

As annoying as the imputed rental value is for new owners in particular, it is just as profitable for the state. In the current interest rate environment, abolishing the imputed rental value would mean a loss of tax revenue. Depending on the scenario, we assume a loss of CHF 1.7 to 3.8 billion. If the mortgage interest rate rises again, the effect could be neutral or even positive.

This is due to the fact that the deduction of debt interest is to be abolished along with the imputed rental value. Mortgage interest can currently be deducted from income tax. Other deductions are also likely to be abolished. For example, those for value-preserving investments, which are currently an argument in favour of renovations.

An opportunity for those wanting to renovate

Anyone who owns or wants to buy a property in need of renovation should therefore listen carefully. Investments in your home that maintain its value can be particularly worthwhile now. These expenses may soon no longer be tax-deductible.

How to make positive use of imputed rental value

It is a good idea to reduce the burden of the imputed rental value by investing in your property - as long as this is still possible. Of course, you will have to invest a little, but it's definitely worth it. These are our tips for capitalising on imputed rental value:

• Focus on renovation and refurbishment: This is particularly important because value-enhancing investments cannot be deducted from income tax.

• Invest in energy systems: The only exception is energy renovations such as PV systems - they can be deducted, although they often increase the value of the property.

• Don't wait too long: Before the imputed rental value is finally abolished, many people will have the idea of renovating something quickly. Be sure to book your craftsmen.

• Keep all receipts: There are no deductions without receipts. So make sure you document everything carefully and file it for your tax return.

With these tips, it may still be worth buying a property in need of renovation. We will be happy to discuss what is the best choice for you. Just give us a call.

The best prospect of your own four walls

Moving into your own four walls is a good feeling. It's even better when you actually don't have to pay any more rent or imputed rental value. If you already own your own home, you can invest in renovating it now. If you have not yet realised your dream of owning your own property, then you have the choice: buy now and renovate or wait for the abolition of imputed rental value? Either way, we will be happy to help and advise you. As tax experts, we know how to take a good look at your tax return.

And just like that, the dream of owning your own home in Switzerland is a good outlook...