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Change in the law
The taxation of imputed rental value is set to be abolished. Read about who would be disadvantaged and who would be relieved by the reform.
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Switzerland is one of the few countries where owners pay tax on the apartments or houses they occupy. This may be about 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 September 28, 2025, the Swiss population will vote on the abolition of the imputed rental value.
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 would mean 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.
Under the current system, the federal government and cantons generate high tax revenues of around CHF 1.5 to 2 billion per year with average mortgage interest rates of 2%. However, calculation, adaptation and implementation require a great deal of administrative effort.
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The Bürgler family lives in the canton of Zurich. Both parents work 50% each – their taxable income is CHF 100,000. The tax administration assesses the rental value of their property as CHF 36,000 per year. The property could therefore be rented for CHF 3,000 a month (3,000 × 12). If the imputed rental value is assumed to be 70% of the market value, this results in a total of CHF 25,200 (36,000 × 0.7).
The Bürgler family’s taxable income therefore amounts to CHF 125,200 (25,200 + 100,000).
Their home also has a mortgage of CHF 850,000, at a mortgage interest rate of 1.5%. The mortgage interest costs are CHF 12,750 (850,000 × 1.5%). In addition, there are maintenance costs of CHF 7,500. Both interest and maintenance can be deducted from the imputed rental value. This is reduced accordingly to 4,950 (25,200 – 7,500 – 12,750).
The Bürgler family’s taxable income, including tax on imputed rental value, is therefore CHF 104,950 (100,000 earned income + 4,950 imputed rental value).
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 of the imputed rental value depends to a large extent on the interest rate. While mortgage rates are low, the deductions for many homeowners are lower than the tax on the imputed rental value. Abolishing this tax would benefit them.
The deduction of mortgage interest on a good-as-new property would only exceed the tax on imputed rental value with higher mortgage interest rates of over 2% and a high loan-to-value ratio of 60%. In this case, a change of system would be a disadvantage for many owners in terms of taxation.
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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 many years. For owners, it seems absurd to have to pay tax on a “fictitious” income. Other points of criticism are the difficulties in ensuring equal tax treatment, the high level of bureaucracy and the creation of an incentive for borrowing. On the basis of the repeated criticism, the National Council and the Council of States agreed on the change of system in December 2024 after seven years of parliamentary debate.
The discussion about imputed rental value and its potential abolition is one step further along, but still not over. Only when the Swiss electorate has spoken for or against will the issue be definitively closed.
“With low interest rates, homeowners have more money at their disposal without imputed rental value taxation and can therefore finance renovations more easily in the long term.”
Given low mortgage interest rates, the winners of the tax reform would be 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 would hurt less because they only have low maintenance costs. New buyers also benefit from the deduction of debt interest for first-time buyers.
Changing the system would 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 most likely losers will be 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 would become more expensive, while old buildings would 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 maintenance would decrease, the construction sector would be among the losers of the tax reform, even if the demand for renovations and maintenance work would 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.
If the taxation of imputed rental value is abolished, tax income will be lost. In order to at least be able to compensate for the loss of income from second homes, the National Council and the Council of States agreed on the creation of a competence basis for a property tax.
This gives the cantons the opportunity to introduce a special tax on second properties. However, the federal decree on cantonal property taxes on second properties is subject to a mandatory referendum because it entails an amendment to the Federal Constitution. In this vote, which is expected to take place in autumn 2025, either a majority of people or a majority of cantons will be decisive.
However, it is questionable whether the parliamentary decision will find the necessary majority in the referendum. A reform of imputed rental value has already failed twice in a referendum. The outcome depends not only on who among the owners will be among the winners and losers of a change. The majority of the population do not own their own home.
Tenants will base their decision on different valuations than homeowners. For example, the new regulation would lead to tax losses for the Federation and cantons. In addition, measures for modernization and sustainability in the building sector would be delayed if deductions for maintenance costs and energy-efficient renovation were to be abolished at the federal level.
The abolition of imputed rental value is also linked to a majority in favor of cantons being allowed to levy the new property tax for second properties.
A third rejection is thus not out of the question.
Until the referendum, which will take place on September 28, 2025, nothing will change for homeowners.. If the bill is adopted, it is expected to come into force in 2026 at the earliest, if not in 2027. If the Swiss people reject the proposal at the ballot box, imputed rental value will continue to exist and is likely to celebrate its 100th birthday in 2034.
Those affected are left no choice but to claim mortgage interest and other costs for tax purposes. You should therefore familiarize yourself with your deduction options, which may vary from canton to canton.
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