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Enjoy tax advantages thanks to home ownership

If you own property, you don't just benefit from the obvious advantages of being a homeowner. You can also enjoy many advantages when filing your tax return each year – and reduce your tax bill as a result. But which bills are you allowed to deduct and what falls under income tax?

31 March, the date on which tax returns are due, is a thorn in the side of many people who live in Switzerland. If you’re not ready to files yours yet and want some extra time to figure out where you can optimise your return, a deadline extension is a good way to go – especially to discover new tricks for paying less tax.

There are plenty of ways for property owners to reduce their tax bill.

1. Imputed rental value is added

Although it has been discussed many times over the years, the imputed rental value still hasn’t been abolished. Each owner-occupied property is estimated with regard to the imputed rental value at the beginning of the purchase, and this value is added to the taxable income. But despite this fictitious income, there is a way to influence and directly reduce your taxable income. During the valuation, it’s worth carefully checking the property data and objecting if you do not agree with something, since this will allow you to influence your tax bill in the future.

2. Mortgage interest is deducted

The days of low interest rates are over. But this isn’t the end of the world, because it means you can now benefit from lower taxes. You can deduct 100% of all interest payable, including mortgage interest, from your income and thus influence your taxable income. In times of higher interest rates, the higher deductions mean that the imputed rental value is no longer as significant.

3. Mortgages play a key role in property tax

Property tax only comes into play when you exceed the permitted exemption threshold, which is very quickly the case when it comes to properties priced in the millions. As a rule, about 70% of the effective market value is taxed for property tax. However, if you have taken out a mortgage, you can deduct the entire amount owed from this amount.

4. Management costs and payments into the renovation fund

In most cantons, condominium owners can deduct the actual costs of property management from their taxes. In addition, payments into the renovation fund are also deductible and, as a result, reduce your tax bill year after year.

5. Value-preserving expenses

As a general rule, all expenditure to preserve the value of a property can be deducted from your taxes in full. The cantons provide clear guidelines as to which work is deductible.

The following is included:

  • Plumbing work
  • Painting and plastering
  • Carpentry
  • Servicing subscriptions, e.g. for the decalcification system
  • Building insurance premiums

Each year, you are free to decide whether you want to deduct the actual costs of these expenses or whether you’d prefer to do it as a flat rate. If you have had major renovation work done or even a conversion, it’s worth submitting all invoices and receipts so you can claim the actual expenses.

In principle, you could say that all work that preserves the value of the house is deductible – with just one exception. Environmentally-friendly investments, such as the replacement of an old heating system with a heat pump or the installation of photovoltaic systems, may be deducted in most cantons and the Confederation, even if they add value to your home.

Would you like to learn more about the tax advantages of property ownership? You will find further tips in our Engel & Völkers taxation guide – for private individuals, real estate agents and companies.

Our staff in your local Engel & Völkers shop will also be happy to help you with any questions you may have and can put you in touch with specialised experts if necessary.

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