Vote on imputed rental value – what it's all about

The imputed rental value is notional income of people who own residential property and live in it themselves. It is intended to correspond to the potential rental income from this property – even though no money is actually moving around. The imputed rental value must be declared as taxable income in the annual tax return.

In return, homeowners can deduct their mortgage interest and property maintenance costs from their taxable income on their tax return.

The idea behind the taxation of the imputed rental value is that tenants and owners should be treated equally: Tenants cannot deduct their rental expenses from their taxes, but owners can offset the mortgage interest and the costs of maintaining the house for tax purposes. The imputed rental value tax is intended to compensate for this advantage.

The imputed rental value was originally introduced in 1915 as a war tax. In 1934 however, it was adopted again in order to cushion the consequences of the global economic crisis. The tax was subsequently extended again and again.

In an international comparison, the taxation of the imputed rental value is unique to Switzerland; in most other countries, owner-occupied properties are not taxed as income. The question of whether the imputed rental value tax is still appropriate has been discussed for years. That is why a referendum is being held now.

• Simplification: Tax returns will be simpler and clearer for people who own residential property and live in it themselves. This is because they will no longer have to declare notional rental income in their taxable income. At the same time, most deductions for maintenance, renovations and mortgage interest will be eliminated.
• Affordability in old age: Pensioners in particular benefit from a lower tax burden, as the imputed rental value often accounts for a large proportion of their taxable income.
• Debt reduction: In Switzerland it is often customary to leave a large part of the mortgage ongoing for tax reasons. This can jeopardize affordability after retirement or become a burden in the event of a sudden death. Furthermore, the state should not create incentives to take on debt for tax reasons.

• Elimination of deductions: Tax deductions for maintenance, renovations and mortgage interest will be restricted or eliminated, which may affect younger and heavily indebted homeowners in particular. An important exception: If you are buying a property for the first time, you can offset part of the debt interest for tax purposes in the first ten years. 
• Less investment in buildings: As maintenance costs are no longer deductible, property owners may be less willing to renovate or invest in greater energy efficiency. Among other things, this could burden the construction industry and lead to fewer climate protection measures being taken.
• Tax losses: The Confederation and cantons are likely to lose billions in revenue, which will have to be compensated for elsewhere.

1. Homeowners who live in their property themselves no longer have to declare notional income for theoretically possible rental income (imputed rental value) in their tax return. This applies to primary and secondary residences.
2. At the same time, deductions for maintenance or renovation work on the property are no longer possible in the tax return. Energy-saving and environmental protection measures can also no longer be deducted from taxable income for federal tax purposes. Cantons may continue to grant such deductions.
3. Mortgage interest for owner-occupied residential property can also no longer be deducted from taxable income. There is an exception for people who are buying residential property for the first time: Married couples can claim a maximum of CHF 10,000 in the first year, CHF 9,000 in the second year and so on, until no more deductions are possible after ten years. For single people it is half of this.
4. A property tax for second properties is also to be introduced at cantonal level. This is in the interests of the mountain cantons in particular, which want to secure important tax revenues through this.

That depends on the amount of your mortgage, the interest rate, the condition of the property, your municipality of residence and the amount of taxable income. 

Any person whose mortgage interest is lower than the imputed rental value is likely to benefit. This means those who have bought cheaply, who have low interest rates or who have already repaid a large part of the mortgage. The abolition of the imputed rental value tax can also bring major tax advantages for pensioners, as it generally accounts for a higher proportion of their taxable income. First-time buyers of owner-occupied residential property are also likely to benefit, as they can claim part of the mortgage interest as an expense in their tax return for the first ten years. If you buy a new build, you need not expect high maintenance costs in the early days.

However, it is also possible that homeowners will pay more tax after the reform than before: Given the current low interest rates, the imputed rental value is higher than mortgage interest for most homeowners – so almost everyone would probably benefit from abolition. However, anyone who owns an older property in need of renovation can no longer offset the costs of the renovation for tax purposes, at least in relation to federal tax, and this may result in tax disadvantages during the year of the renovation. 

A simple rule of thumb for the affordability of a home is that housing costs should not exceed around a third of gross income. In the example below, this is no longer the case with a long-term illness of 41%. The situation can be alleviated with a private disability pension. At 34%, affordability is just about given. 

• Imputed rental value: Notional income declared in the tax return for owner-occupied residential property.
• Debt interest deduction: Tax deduction for interest paid on mortgages.
• Maintenance costs deduction: Possibility of claiming the costs for the value-preserving maintenance of a property against tax.
• Affordability: Ratio of current housing costs to income; decisive for lending and financial security.
• Property tax: New possible tax on second homes at cantonal level.
• First-time buyer: Persons purchasing residential property for the first time; they would benefit from temporary tax relief if the motion is approved.