Real Estate as Assets: How Residential Property Is Taxed in Switzerland

Buying property in Switzerland is an important way to build wealth. However, homeownership also comes with tax obligations. Many owners are surprised that even when living in their own property, they must report taxable income. At the same time, mortgage interest and maintenance costs offer potential deductions.

This article explains how real estate is taxed in Switzerland, the differences between owner-occupied and rented properties, and which deductions are available.

Basics of Property Taxation

Taxable Object

Real estate in Switzerland is part of taxable wealth and is considered in both income tax (via imputed rental value or rental income) and wealth tax.

Owner Responsibilities

All property owners must declare their real estate in the annual tax return, whether they occupy it themselves or rent it out.

Imputed Rental Value: Taxation of Owner-Occupied Property

What Is the Imputed Rental Value?

If you live in your own home, a notional income called the imputed rental value must be declared. It aims to tax the benefit of rent-free housing.

Amount of Imputed Rental Value

The imputed rental value is usually 60–70% of the market rent for a comparable property. Exact calculations are made by cantonal tax authorities.

Criticism

The imputed rental value is politically controversial because it increases taxes without actual cash inflow. Abolition is frequently discussed but not yet implemented.

Taxation of Rented Property

Rental Income

Rental properties generate taxable income. All rental income must be declared.

Deductions

Property owners can deduct related costs, such as:

• Maintenance and renovation expenses
• Mortgage interest
• Administration costs

Real Estate and Wealth Tax

Valuation

Properties must also be declared as part of wealth. They are usually valued at the cantonal tax value, which is often below market value.

Foreign Properties

Foreign properties must also be declared. They are generally not directly taxed in Switzerland but increase the applicable tax rate (progression effect).

Deductions for Property Owners

Mortgage Interest

Mortgage interest can be fully deducted from taxable income, a major advantage for leveraged homeowners.

Maintenance Costs

Owners can choose between:

• Flat-rate deduction: Usually 10–20% of rental income or imputed rental value, depending on property age
• Actual costs: Includes invoices for repairs, renovations, or energy-efficiency improvements

Energy-Efficiency Renovations

Costs for energy-saving measures (insulation, solar systems, heat pumps) are often deductible in many cantons.

Practical Examples

Example 1: Owner-Occupied Apartment

An owner lives in a Zurich apartment with an imputed rental value of CHF 15,000. Mortgage interest of CHF 12,000 is paid. The imputed rental value must be declared as income, but mortgage interest can be deducted.

Example 2: Rented Property

A couple rents out a house in Basel for CHF 30,000 per year. This is taxable income. They can deduct CHF 8,000 for maintenance and CHF 10,000 in mortgage interest.

Common Mistakes and Tips

Common Mistakes

• Failing to declare foreign properties
• Assuming owner-occupied property is tax-free
• Deducting maintenance costs without supporting documentation

Tips

• Declare all properties, including those abroad
• Use official cantonal tax values for valuation
• Keep all maintenance invoices
• Compare flat-rate deductions with actual costs to determine the most advantageous option

Conclusion

Owning real estate in Switzerland provides many benefits but also creates complex tax obligations. Both owner-occupied and rental properties generate taxable income and impact wealth tax. By smartly utilizing deductions—especially mortgage interest and maintenance costs—owners can significantly reduce their tax burden.