Your home on your tax return: how to avoid losing money

Value preservation or value enhancement: a crucial distinction

In principle, the following applies to income tax: only value-preserving costs are deductible. This includes all measures that maintain or restore the existing condition of a property. This includes classic repairs, the replacement of building components or maintenance work on the roof, façade, pipes or windows.

The situation is different for value-enhancing investments. Anyone who expands, extends or significantly increases the standard of living creates new assets. These costs are not deductible from income tax, but only have an effect on any property gains tax. In practice, renovation costs are often divided into a value-preserving and a value-enhancing portion.

It should also be noted that many cantons currently still have flat rates as a percentage of the imputed rental value, provided that the actual value-preserving costs do not exceed this, such as the 20% deduction flat rate in the canton of Zurich.

Carefully check and store receipts and invoices

In practice, the difficulty lies less in the theory than in the demarcation. Many renovations are both value-enhancing and value-preserving in nature. This is precisely where most mistakes occur. It is not uncommon for costs to be declared as a lump sum or incorrectly allocated.

It becomes particularly tricky when receipts are missing or invoices are not clearly itemized. In such cases, the only option is often a flat-rate deduction – even if significantly higher actual costs were actually incurred.

Planning is not a minor matter, but worth hard cash

The timing of renovation work also plays an important role. Anyone who bundles all major measures into a single year can no longer benefit from tax relief in the following year. Due to tax progression, a high deduction in just one tax period may have a less favorable effect than if the work is spread over several years.

It can therefore be worthwhile staggering renovations over two or three tax periods if possible. This allows you to make the most of tax reduction opportunities year after year.

Energy-efficient renovations as a special tax case

Particularly interesting is the development around energy-related renovations. Although a new heat pump or roof insulation, for example, increase the value of the property, such measures are still considered deductible maintenance costs in many cantons. The public promotion of sustainability is clearly having an effect here.

Even if subsidies have been paid, the net share, i.e. your own financial contribution, can usually still be claimed for tax purposes, provided that the accounts are clean.

However, these regulations vary from canton to canton. What is permissible in Zurich does not necessarily apply in Geneva. If you are unsure, you should ask the relevant cantonal tax office in advance.

Important note: Abolition of imputed rental value from 2028

One aspect that is currently still often underestimated is the planned abolition of the imputed rental value as of 2028. This reform will fundamentally change the tax framework for homeowners.

Up to and including the 2027 tax period:

• Value-preserving maintenance costs
• and energy-efficient refurbishments

still be deducted from income tax in the previous style.

New rules will apply from 2028, including

• New buyers can only claim maintenance costs against tax for a transitional period of ten years
• Deductions for energy-efficient renovations are being revised
• The traditional maintenance deduction for existing owners largely no longer applies

Conclusion:
Anyone planning value-preserving renovations anyway should – if possible – carry them out by the end of 2027 in order to take full advantage of the current tax opportunities.

In the end, it turns out that renovations are not a self-runner in the tax return. If you declare them unprepared, you will quickly lose money. However, if you know how maintenance, planning and documentation work together, you can also use your home sensibly for tax purposes.

Checklist: What you should consider when renovating

1. Make a clear distinction: Is something being repaired (deductible) or upgraded (non-deductible)?
2. Collect all invoices, ideally with a detailed description of the work.
3. Record the reason why the work was necessary (e.g. “leak repaired” instead of “bathroom renovated”).
   → Photos before and after the work are often important evidence for the tax office.
4. Plan larger projects over several tax periods to make optimum use of the tax advantage.
5. Check cantonal special rules, especially for energy measures.

With these steps, nothing stands in the way of an optimized tax return and your home will benefit from both a fresh coat of paint and a clever tax tip.