The End of Imputed Rental Value: What the Swiss Tax Reform Means for You

On September 28, 2025, Swiss voters approved a landmark reform that will fundamentally change how residential property is taxed. For decades, homeowners have had to pay tax on a "fiktiver Mietwert" or imputed rental value—a theoretical income for living in their own home. While this is being abolished, the trade-off involves the loss of several key tax deductions, meaning homeowners must act now to prepare for the new system, which is expected to take effect in 2028.

The Core Change: Goodbye to Imputed Rental Value

The most significant shift is that the imputed rental value for self-occupied primary and secondary residences will be completely abolished. You will no longer be taxed on the "rental income" you aren’t actually receiving. However, this change does not apply to rental properties, which will continue to be taxed on actual rental income.

The Cost of the Reform: Vanishing Deductions

To balance the loss of tax revenue from the imputed rental value, the government is cutting several common deductions for self-occupied properties:

• Maintenance and Insurance: Deductions for maintenance, insurance, and third-party management costs will be eliminated at the federal, cantonal, and communal levels for self-occupied homes.

• Energy-Saving Measures: These deductions will be abolished at the federal level. However, cantons have the freedom to decide whether to keep them for cantonal and communal taxes, creating a "hybrid system".

• Debt Interest: The current system allows for the deduction of private interest up to the amount of taxable investment income plus an additional CHF 50,000. Under the new law, this general deduction disappears.
  

Special Rules for Interest and Mortgages

The reform introduces specific restrictions on interest deductions that will impact how you manage your debt:

• First-Time Buyers: There is a "consolation prize" for those purchasing their first self-occupied home. They can deduct mortgage interest for ten years, but the amount is capped (e.g., CHF 10,000 for married couples) and decreases by 10% each year.

• Rental Properties: Owners of rental properties can still deduct interest, but only pro-rata. The deductible amount is determined by the ratio of the rental property’s value to the owner's total assets. For example, if your rental property makes up 35% of your total wealth, you can only deduct 35% of your total debt interest.
  

Winners and Losers

The impact of this reform depends heavily on your financial structure:

• Winners: Owners with low or no mortgages benefit most because they lose the imputed rental value tax but weren't using many interest deductions anyway.

• Losers: Owners with high mortgages will see their tax burden rise as interest deductions vanish. Owners of older or poorly maintained properties also lose out, as they can no longer offset renovation costs against their income.

Strategic Action Plan: What to Do Before 2028

Since the new law isn't expected to trigger until 2028, experts suggest using this "window of opportunity" to optimize your tax position:

1. Fast-Track Renovations: Complete major maintenance or energy-saving projects before the system change to ensure they remain tax-deductible.

2. Stagger Your Investments: To maximize the tax benefit and break the tax progression, consider spreading large renovations over the next three years (e.g., 2025–2027).

3. Review Your Mortgage: Analyze whether it makes sense to amortize your mortgage. If your investment returns are higher than your mortgage interest, keeping the debt may still be beneficial, but the lack of tax deductibility changes the math.

4. Stockwerkeigentümer (Condo Owners): If you are part of a condominium association, consider increasing contributions to the renovation fund now, as these contributions are often still deductible under current rules.

A Helpful Perspective Think of the current tax system as a heavy backpack you are forced to carry (the imputed rental value), but you are allowed to put balancing weights (deductions for interest and repairs) in your pockets to keep you upright. The reform removes the backpack entirely, but it also empties your pockets. If your backpack was very light but your pockets were full of weights, you might actually find yourself off-balance once the new system begins. An early review of your "financial posture" is essential to stay steady.