The tax that Swiss homeowners currently pay on the imputed rental value of their properties is likely to be eliminated, although the details of the proposed tax reform are still being hammered out in Swiss parliament. Here are some steps you can take to make the most of the existing tax system before it’s changed, which could happen in the next two or three years.
The announcement caused a buzz last fall: the Swiss government is working on a bill that would eliminate the rental-value tax paid by homeowners. This is the tax that owner-occupiers must pay on the rent they would theoretically receive as income if they rented out their property. The tax was introduced in part to level the playing field between homeowners and renters, but homeowners believe it’s unfair because it artificially inflates their income – and therefore their tax bill.
What’s being discussed in parliament?
Left-leaning parties view the abolishment of the tax as a handout to homeowners. Concessions therefore need to be made to get the measure passed, such as reducing or eliminating the tax deductions for mortgage interest and renovation costs. But the upper and lower houses of Swiss parliament haven’t yet agreed on the specifics, and the bill is still being bounced back and forth. Even if the change does get through parliament, it’ll probably be a few more years before the rental-value tax is off the books, as the reform might well be put to a referendum.
How can you get ready?
The good news is that there are things you can do in the meantime to optimize your taxes. Below are three suggestions for homeowners as we wait for the final decision on how tax deductions will change.
1. Complete any planned renovation work
Don’t wait any longer to renovate your home. For now, renovation costs are tax deductible – but they probably won’t be if the tax reform goes into effect. Take advantage of this window of opportunity!
2. Make energy-efficiency improvements
Investments you make to improve your home’s energy efficiency are likewise tax-deductible for now. These investments could include replacing the windows, switching to more effective insulation or installing solar panels. Here too, these deductions could be eliminated when the rental-value tax is removed. We recommend you make energy-efficiency investments sooner rather than later.
3. Take out or renew your mortgage loan
It’s still not clear what percentage of mortgage interest homeowners will be able to deduct after the tax reform bill is passed. So if you’re planning to take out or renew a mortgage loan in the next two years, we suggest you choose a short term. That will give you the flexibility to refinance if needed soon after the changes go into effect.
Want expert advice?
If you’d like to speak with our specialists about how the tax reform could affect your particular circumstances, or to explore different scenarios, contact us today. We’d be happy to help.
