Abolition of the imputed rental value?

The taxation of imputed rental value has been an integral part of the Swiss tax system for decades and is a regular topic of discussion. Anyone who lives in their own home must pay tax on the so-called imputed rental value as income. This is a fictitious rent calculated as if the owner were renting out their property to a third party. In return, debt interest and maintenance costs may be deducted, which significantly reduces the tax burden for heavily indebted owners.

For many property owners, this means that their tax burden depends on the size of their mortgage and the maintenance costs they claim – a calculation that becomes particularly significant when interest rates rise and renovation work is required. Now, a fundamental change to the system is on the cards. On 28 September 2025, Switzerland will vote on a constitutional amendment that would allow the cantons to introduce a property tax on second homes. Only if this proposal is accepted can the federal law already passed by parliament, which provides for the abolition of the imputed rental value, come into force.

Elimination of imputed rental value and new rules for deductions

The key points are clear: the imputed rental value would be eliminated, and maintenance costs would no longer be deductible at the federal level (cantons may introduce special new provisions for certain areas such as monument preservation or energy and environmental protection measures). In future, debt interest could only be deducted on a pro rata basis (rented property values in relation to total assets) – i.e. only for rented assets. A general debt interest deduction for owner-occupied homes would no longer apply. A new first-time buyer deduction would come into play, which would provide relief for first-time buyers in the first ten years: a maximum of CHF 10,000 for married couples and CHF 5,000 for single persons in the first year, decreasing on a sliding scale thereafter. For second homes – such as holiday homes – the cantons would be given the power to introduce a new property tax, the amount and structure of which could be regulated differently from canton to canton.

What does this mean specifically for owners?

Those who have largely paid off their homes and are no longer making major investments are likely to benefit from the abolition, as the imputed rental value will no longer apply without any significant deductions being lost. However, those who are heavily indebted and regularly claim high maintenance costs will face a higher tax burden. For holiday properties, everything depends on how the cantons use their new powers. One thing is clear: the new system will not come into force overnight, as the political process takes time. Nevertheless, it is already worth rethinking your own financial strategy, planning maintenance work in advance and critically reviewing mortgage structures. This way, you will be prepared regardless of the outcome of the vote in autumn. For example, it can be assumed that if the proposal is accepted, construction prices will rise sharply for two to three years, as everyone will want to renovate.

 

Our recommendations for action

 

  • Plan maintenance: When the reform comes into effect, maintenance deductions will no longer apply (federal government, usually also cantons). Consider major value-preserving work immediately – prices and capacities will rise significantly before the reform comes into effect. 
  • Review your mortgage strategy: Without a general debt interest deduction, it is worth taking a sober look at amortisation, terms and interest mix. However, there is no blanket rule – cash flow, interest rate risk and life planning are decisive factors that need to be weighed up.  
  • Keep an eye on holiday properties: Pay attention to cantonal signals regarding future property tax. Depending on the canton, this could significantly increase net holding costs. 
  • First-time buyers in focus: Potentially benefit from the first-time buyer deduction; structure your financing so that the interest burden is reasonably cushioned by the deduction in the first few years.
  • Landlords (investment properties): For rented properties, maintenance and administration costs as well as interest (but only proportionally in relation to total assets) remain deductible – keep your asset allocation for private and business assets clearly separate.

"The abolition of the imputed rental value has many facets, and there are winners and losers among both owners and tenants." Claude Ginesta, CEO