Have you purchased your first home and now need to complete your tax return as a property owner? Did you know that you can save yourself a lot of money here? We explain how many deductions you can claim and where you can save a great deal of tax.
Every year at the end of March, it is time for Swiss residents to submit their annual tax return. As a property owner, there are a number of ways to reduce your tax burden and save a great deal of money.
If your property is owner-occupied, a notional imputed rental value is calculated and taxed as additional income. Although this increases your taxable income, you can influence how high this imputed rental value is. When estimating the official value, it’s worth checking the records and lodging an appeal if you disagree with the property valuation.
Mortgage interest, on the other hand, is fully tax-deductible. In the best-case scenario, the imputed rental value is offset by the interest owed, although this is unlikely at present, given the current interest rate situation.
Have you redecorated, replaced the fridge or upgraded your heating? Work and investments that retain the value of your property are fully tax deductible. If you live in a new-build that doesn’t require any major investment, you can apply a flat-rate deduction. This is usually around 10% of the imputed rental value. If you are planning more substantial renovations, it’s worth settling these efficiently and spreading the payments out over two years, in order to reduce progressive taxation as much as possible.
It is important to remember that value-adding work, such as an extension or new conservatory, are not tax deductible. The only exceptions to this are energy-efficient and environmentally-friendly investments. If you replace your old oil heating system with a more sustainable air-source heat pump or install energy-efficient windows, you can deduct these costs from your tax, even though they generally increase the value of your property.
From a tax perspective, indirect amortisation is more worthwhile than direct amortisation in the long term. In the case of indirect amortisation, you can deduct the payments made into your Pillar 3a account from your tax over several years. Additionally, you pay the same amount of mortgage interest every year, which is also tax deductible. In the case of direct amortisation, your mortgage interest payments fall, but your tax burden increases every year because a lower amount can be deducted.
Always check whether any other deductions are permitted in your canton of residence. In many cantons, buildings insurance premiums, administration costs and payments into the restoration fund for condominiums are all tax deductible.
Additional tax advice and information regarding property taxation are available in our Engel & Völkers taxation guide – online or in printed form and free of charge, of course. Our experts will be happy to help. Simply get in touch with your nearest Engel & Völkers shop. We look forward to assisting you!
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