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Change in the law
The imputed rental value will be abolished following the referendum on September 28. Read about what will change and the tax implications.
Content:
Switzerland is one of the few countries where owners pay tax on the apartments or houses they occupy. This is going to change. After the abolition of the taxation of imputed rental value had been discussed for decades, the National Council and the Council of States agreed on a fundamental change in December 2024.On 28 September 2025, the Swiss electorate voted on and approved the abolition of imputed rental value with 57,7% votes in favor”.
We will show you how the taxation of imputed rental value, which is currently still in force, works, how the burden can be reduced and what the planned reform means for you.
The imputed rental value corresponds to a notional amount that owners could earn when renting out their residential property. Owner-occupiers must pay tax on this value as income. According to the Federal Supreme Court, the imputed rental value must be at least 60% and may not exceed 70% of the market rent. It is determined by the cantonal tax authorities. Each canton is free to calculate imputed rental value as it sees fit.
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The Bürgler family lives in the canton of Zurich and would like to find out the imputed rental value of their property. Here’s how they should calculate it:
Position | Position | Calculation | Calculation | Amount (CHF) | Amount (CHF) |
|---|---|---|---|---|---|
Position | Taxable income (parents 50% each) | Calculation | – | Amount (CHF) | 100,000 |
Position | Market rent (estimated) | Calculation | 3,000 × 12 | Amount (CHF) | 36,000 |
Position | Imputed rental value (70% of market rent) | Calculation | 36,000 × 0.7 | Amount (CHF) | 25,200 |
Position | Subtotal taxable income | Calculation | 100,000 + 25,200 | Amount (CHF) | 125,200 |
Position | Mortgage | Calculation | – | Amount (CHF) | 850,000 |
Position | Mortgage interest (1.5%) | Calculation | 850,000 × 0,015 | Amount (CHF) | –12,750 |
Position | Maintenance cost | Calculation | – | Amount (CHF) | –7,500 |
Position | Reduced imputed rental value | Calculation | 25,200 – 12,750 – 7,500 | Amount (CHF) | 4,950 |
Position | Final taxable income | Calculation | 100,000 + 4,950 | Amount (CHF) | 104,950 |
Swiss cantons have a certain amount of leeway when calculating imputed rental value. This means they can set the imputed rental value higher than the minimum of 60% set by the Federal Supreme Court. In addition, the cantons are free to choose the method for determining the rent used as a basis for the imputed rental value.
A total of eleven cantons use comparative rents as a basis. They calculate the imputed rental value on the basis of the market and local rents: Appenzell Innerrhoden, Appenzell Ausserrhoden, Glarus, Grisons, Lucerne, St. Gallen, Schaffhausen, Schwyz, Ticino, Uri and Valais.
Seven cantons use the individual valuation procedure, which means they calculate the imputed rental value using a hedonic model. In the hedonic valuation, the property value is derived from the actual sale prices of comparable properties: Aargau, Bern, Fribourg, Jura, Nidwalden, Obwalden and Thurgau.
The cantons Basel-Landschaft, Basel-Stadt, Geneva, Neuchâtel, Solothurn, Waadt, Zug und Zurich, on the other hand, have developed their own methods of valuation.
The tax authorities periodically reassess the imputed rental value of your property. It may well happen that they mistakenly set the imputed rental value too high. For example, changes to the building or its residential use (e.g. only partial occupancy) are not taken into account. It is therefore worthwhile to check the value in the tax assessment and compare it with previous years. If the imputed rental value has been calculated incorrectly, contact the relevant tax authority directly within the valid period (usually 30 days) to submit a written objection.
To compensate for the tax, as an owner, you can deduct costs that are directly related to the property from the imputed rental value. These include mortgage interest and maintenance costs. This significantly reduces the effective tax burden.
Each year you can choose whether to claim the effective costs or a lump-sum amount. In most cantons, the overall deduction is between 10 and 20% of the imputed rental value, depending on the age of the property.
Which costs can be deducted from the imputed rental value for tax purposes:
What is the influence of the interest rate?
The tax burden resulting from imputed rental value depends heavily on theinterest rates. If mortgage interest rates are low, the deductions for many owners are lower than the tax on imputed rental value. Only with interest above 2% and a loan-to-value ratio of at least 60% do the deductions exceed the tax.
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The concept of imputed rental value has been controversial for some time. Introduced in 1934 as an emergency measure to restructure the federal budget, a reform has been discussed for decades. For owners, it seemed absurd to have to pay tax on a “fictitious” income. Other points of criticism were the difficulties in ensuring equal tax treatment, the high level of bureaucracy and the creation of an incentive for borrowing. After repeated criticism, the National Council and the Council of States agreed on a change of system in December 2024, which has now been confirmed by the popular vote. By agreeing to the abolition of imputed rental value, the Swiss electorate has ended a long-standing debate and taken an historic step in tax policy.
Imputed rental valuewasembedded in Swiss history for over 100 years. In this time, ithad undergonea large number of changes.
Given low mortgage interest rates, the winners of the tax reform are the owners of new apartments in large residential centers. The imputed rental value of their apartments is high, and the loss or limitation of deduction options will hurt less because they only have low maintenance costs. New buyers will also benefit from the deduction of debt interest for first-time buyers.
Changing the system will be of most benefit to those homeowners who have already amortized their mortgage or have almost fully amortized it. Pensioners in particular are likely to fall into this category. For them, abolishing taxation on imputed rental value in relation to their income will have a significant impact.
The losers are the owners of older properties in need of renovations. Those who buy an older house and invest heavily in renovations will no longer qualify for substantial tax relief on these expenses. As a result, the price gap between new construction and older properties will widen: new buildings will become more expensive, while old buildings will be threatened with a loss of value.
Second-home owners are also likely to be among the losers of the reform. It is unclear how high a new cantonal property tax could be. However, the mountain cantons have the incentive not only to use the tax to compensate for the loss of imputed rental value for second homes, but also to take action against “cold beds.”
Because the incentives for property maintenancewill decrease, the construction sector will be among the losers of the tax reform, even if the demand for renovations and maintenance will probably increase sharply again shortly before the system change. Due to the limited deductibility of debt interest, mortgages could also be less in demand. The banking sector as a whole could therefore also be among the losers.
The exact date on which imputed rental value will be abolished is not yet known and no conclusive statements can be made at this time. The Federal Council will decide on the entry into force and give the cantons sufficient time to implement the legislative amendments.
Do not excessively amortize the mortgage
After the system change, the option to use mortgages for tax optimization will no longer be available. This creates an incentive to amortize in order to reduce interest costs. However, owning a home ties up a significant amount of capital in the long term and poses a concentration risk for wealth development. Maintaining a constant, moderate loan-to-value ratio promotes diversification and provides flexibility for higher-yield investments. Investments in financial assets often yield higher long-term returns than the cost of mortgage interest. However, these investments also carry risks: rising interest rates can increase financing costs and reduce property values, while investment portfolios are subject to value fluctuations. A fixed-rate mortgage increases planning security.
Bring forward renovations
For foreseeable renovations, it should be promptly assessed whether it makes sense to bring them forward in order to still benefit from tax deductions during the transition phase – especially given the effective cost increase of 20 to 30 percent without tax deductions. Due to increased demand, longer waiting times may arise, meaning not all desired projects can be completed in time before the system change.
By approving the abolition of imputed rental value, the Swiss electorate has spoken in favor of an historic change to the system. For homeowners, this means not only a simplification of the tax system, but also the need to adjust their tax and financial planning. Since tax deduction of maintenance costs and renovations will be abolished in the future, it makes sense to implement renovations before the reform comes into force in order to claim them for tax purposes. This applies in particular to major investments such as energy-efficient renovations or modernizations. Homeowners should also find out about the exact transitional periods and cantonal regulations at an early stage in order to make the most of the remaining tax advantages. Advice from experts can help to use the remaining time strategically and cushion the financial impact of the reform.
A preferential interest rate for your renovation project and an additional eco-bonus of 0.30% if the construction work is to improve energy efficiency or leads to a Minergie® certificate or GEAK® certificate of class A or B.
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