Tax Optimization Despite the Abolition of Imputed Rental Value

On September 28, 2025, the Swiss electorate decisively voted to abolish the imputed rental value. After previous attempts to eliminate the taxation of owner-occupied property failed, the system change will now take effect. Implementation is generally expected in 2028.

This article explains what this means for homeowners, property owners, and particularly for their financial planning.

New Tax Rules for Homeowners

With the abolition of the imputed rental value for primary and secondary residences, a large portion of deductions will disappear. Only expenses for energy-saving measures remain partially deductible (hybrid system; no deduction for federal taxes, while cantonal and municipal rules remain in place). Mortgage interest is no longer tax-deductible, except for first-time buyers, who can still partially deduct it for 10 years. This deduction decreases by 10% each year.

It is clear that owners of older properties will face significant pressure if they want to deduct urgently needed renovation costs. Careful and timely financial planning not only helps optimize taxes but also accounts for the likelihood that many contractors may be overwhelmed with requests, potentially increasing prices. It pays off to obtain multiple quotes early.

Optimal Planning of Maintenance and Renovations

For maintenance work, homeowners should prioritize value-preserving measures such as plastering, painting, plumbing, and carpentry, as only these are tax-deductible. Value-increasing measures, like converting an attic, adding a sauna, or building a conservatory, are not deductible from taxable income.

For financial planning, it is important to spread anticipated expenses over two to three years to manage tax progression. Short-term measures, like window or roof work, should ideally be undertaken within the current year, while other planned investments can be scheduled for 2026 and 2027. Maintenance investments should also be coordinated with other financial planning measures, such as contributions to a pension fund or the third pillar, for optimal tax planning.

Owners of rented or non-owner-occupied properties can still deduct maintenance costs and mortgage interest after the new law takes effect, but there are special rules based on the proportion of the rental property in the total assets. Mortgage interest can continue to be deducted in proportion to this share.

Dealing with Mortgages and Liquidity

After the system change, mortgage interest can no longer be deducted for tax purposes. This raises the question of whether mortgages should be paid off as quickly as possible. Anyone who has financed their investments in such a way that, after taxes, they generate a higher return than the mortgage interest has no reason to pay off the mortgage early.

However, the most crucial point is liquidity. Young families in particular should be aware that larger purchases will come up from time to time, requiring liquidity. Retirees should also keep in mind that once a mortgage is paid off, it can become a problem, as they will hardly be able to obtain a new mortgage due to affordability requirements. Good planning is therefore highly advisable here as well and should be addressed in a timely manner.