On 28 September 2025, the Swiss electorate voted to abolish taxation on the imputed rental value of owner-occupied properties. As a result, property owners will no longer be able to claim several tax deductions, though there will be targeted exceptions for debt interest. Cantons will also be able to impose a property tax on second homes for personal use.
With the timeline for the change to take effect yet to be decided, many property owners are wondering what the consequences will be for them. Samuel Meylan, Head of Tax and Legal Advice for Clients Resident in Switzerland at Lombard Odier, investigates the most important implications of this change.
The end of a system of deductions
Today, people who both own and live in a main or second home are taxed on the property’s imputed rental value, which is the amount they would theoretically pay to rent the property from themselves. This system allows property owners to claim tax deductions on debt interest, property maintenance costs and energy-saving measures.
As Samuel explains, when taxation on imputed rental value ends, “Almost all the deductions we have been entitled to are going to disappear. Property maintenance costs will no longer be tax deductible, while energy-saving measures will be only partly deductible. Tax deductions on debt interest will also virtually disappear.”
Almost all the deductions we have been entitled to are going to disappear
Debt and interest: A new framework
“Debt will remain deductible for wealth tax, and you will still be taxed on your net wealth” says Samuel. “However, debt interest will no longer be deductible, regardless of whether it is on a mortgage, Lombard Loan, family loan or consumer loan.”
However, as Samuel explains, two exceptions will remain: “The first is that debt interest related to the first purchase of a main home will remain deductible, albeit for a limited period of 10 years. You will also be able to partially deduct debt interest if you own an investment property, i.e. a property rented out to someone else.”
Sliding deduction over 10 years
In the case of debt interest on the first purchase of a main home, Samuel notes: “The deductible amount will reduce by 10% of the initially deductible amount – capped at CHF 10,000 for a couple and CHF 5,000 for a single taxpayer – per year until the end of the limited period of 10 years.”
For investment properties, the calculation will be more complicated. “The taxpayer will be able to deduct debt interest in proportion to the share of their total wealth represented by the investment property,” Samuel explains. “For example, if I have assets worth CHF 10 million and an investment property worth CHF 4 million, that property represents 40% of my wealth. Therefore, I’ll only be able to claim a deduction worth 40% of my debt interest.”
Do these changes mean we should be repaying what we’ve borrowed? In Samuel’s view, “With interest rates as low as they are today, I don’t think so. Generally, you can borrow at 1% interest. If you have invested in financial assets, they are likely to give you a return of more than 1%, even after tax. So, for the time being, it doesn’t make financial sense to repay what you have borrowed. I think people who can choose between investing in assets and repaying borrowings should stay invested.”
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“Maintenance costs related to investment properties will remain tax deductible under the new system,” says Samuel. “However, you’ll no longer be able to claim deductions for maintenance on main and second homes. So, if you have any maintenance that needs to be done in the next few years, it makes sense to bring the work forward to maximise tax deductions if you can.”
A hybrid system of tax deductions for energy-saving measures will be introduced
Partial deductions for energy-saving measures
Finally, a hybrid system of tax deductions for energy-saving measures will be introduced following the abolition of tax on imputed rental value. “Such deductions will only cease for direct federal tax, but they’ll continue for cantonal and municipal taxes,” says Samuel. “So, if you want to maximise your deductions, you need to plan ahead. The extent of possible deductions will also depend on the property’s canton. In Geneva, for example, the total tax of roughly 40% consists of direct federal tax of around 10% and cantonal and municipal taxes of around 30%. However, the picture is very different in German-speaking Switzerland, where the tax split is more like 50/50. Therefore, the best approach is likely to differ from one canton to another.”
The date for the abolition of tax on imputed rental value not yet been confirmed. It is most likely to happen in 2028, though some think it may be a little later
Exactly when the new arrangements will come into force is still vague
“The date for the abolition of tax on imputed rental value has not yet been confirmed,” says Samuel. “It is most likely to happen in 2028, though some think it may be a little later. That means property owners have at least two years to get tax-deductible maintenance work done.”
However, as Samuel notes, “The actual law around abolishing the tax on imputed rental value and ending related deductions is clear and has been voted on. What is not yet clear is how the proposed tax on second homes – which cantons will be able to introduce to make up for losses resulting from the end of imputed rental value – will work. The cantonal legislators have not yet had a chance to discuss the matter, so we don’t yet know how it will be levied or at what rate.”
Ultimately, the big winners will be those building new properties right now, who probably won’t have to pay any significant maintenance costs for 20 years
The consequences for the property market
In the longer term, this tax upheaval could have a pronounced impact on the property market. “Old properties that generate regular and significant maintenance costs may attract fewer buyers, because such properties will no longer offer any tax benefits,” explains Samuel. “Ultimately, the big winners will be those building new properties right now, who probably won’t have to pay any significant maintenance costs for 20 years.”
How will property prices and Swiss real estate funds be affected?
Fabio Simoncini
Senior Analyst and Portfolio Manager, Real Estate
Bank Lombard Odier & Co Ltd
Overall, the impact on the price of condominiums and owner-occupied private homes will be negative. The abolition of tax deductions for renovation works means owners no longer have a major incentive to maintain and improve their properties. As such, there’s a risk that the physical and market depreciation of these assets will accelerate. In turn, this could weaken the resale market, leading to bigger sale discounts and a general erosion of value in a major segment of the country’s property stock.However, it is important to note that the changes will only apply to main and second owner-occupied homes and will not affect rental or commercial properties. This means the abolition of tax on imputed rental value will have no impact on listed Swiss real estate funds or commercial funds, which only hold investment properties.
N.B. At the time of publication, the Swiss Confederation confirmed the abolition of tax on imputed rental value and specified that there will be two exceptions to the end of tax deductions on debt interest: a sliding deduction over 10 years for first-time buyers (initially capped at CHF 10,000 for couples and CHF 5,000 for individuals) and a proportional deduction for assets that are rented out or leased. How exactly the cantonal special tax on second homes will be implemented (e.g., base, rate, arrangements) remains to be defined. The Federal Council will set a date for these changes to take effect soon.
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