On 20 December 2024, the Council of States and the National Council decided to abolish the imputed rental value. After more than seven years of parliamentary negotiations, the councils agreed on a complete system change in the taxation of home ownership. In this context, parliament has also approved the creation of a constitutional basis for a cantonal property tax.
The two proposals provide for the following changes:
Abolition of the imputed rental value
Homeowners will no longer have to pay tax on the imputed rental value of their self-occupied primary and secondary residences or holiday homes, at either the federal or the cantonal and municipal level.
Extensive abolition of deductions for owner-occupied properties
Deductions for income-related expenses, i.e. maintenance expenses, costs for the renovation of newly acquired properties, insurance premiums and management fees, will no longer be allowed. The same applies to demolition costs in preparation for replacement construction. Deductions for investments in energy saving and environmental protection will be abolished at federal tax level. The cantons may continue to allow such deductions on a temporary basis until no later than 2050. Costs for conservation work on heritage properties will remain deductible at the federal level as before. The cantons may also continue to allow corresponding deductions.
Changes to interest deduction rules
To date, interest on debt can be deducted up to the amount of taxable investment income plus an additional CHF 50,000. With the abolition of the imputed rental value, the deduction of interest on debt will be limited to the proportion of non-owner-occupied properties in Switzerland or in the canton relative to total assets (so-called pro-rata restrictive method). For first-time buyers of owner-occupied properties, an additional interest deduction of up to CHF 5,000, or CHF 10,000 for married couples, will be granted annually, which is reduced on a straight-line basis over 10 years.
Constitutional basis for a cantonal property tax on predominantly owner-occupied secondary residences
The cantons are already authorised to levy limited property taxes. Following the abolition of the imputed rental value, they will have considerable leeway to impose higher property taxes on predominantly owner-occupied secondary residences in order to mitigate the anticipated tax shortfalls resulting from the abolition of the tax on the imputed rental value.
Subject to referendum
The changes to the taxation of home ownership are subject to an optional referendum. However, the proposal has been linked to the constitutional amendment regarding the property tax, which is subject to a mandatory referendum requiring approval from both the people and the cantons. Whether this final hurdle will be overcome remains unclear.