The Abolition of the Imputed Rental Value in Switzerland: What Changes Now — and Why Rushing into Renovations May Not Make Sense
The abolition of the imputed rental value (“Eigenmietwert”) in Switzerland marks a significant shift in the taxation of homeownership. Many homeowners are now wondering whether they should hurry to renovate before the reform takes effect. However, this approach is not necessarily the most rational one — especially when comparing it with alternatives such as extra pension fund (BVG) contributions or stock market investments.
1. What Exactly Is Changing with the Abolition of the Imputed Rental Value?
a) Elimination of the Tax on a Fictitious Income
The imputed rental value is the notional income homeowners were deemed to receive by living in their own property — as if they were renting it out to themselves. This fictional rent was taxed as income to balance the treatment between tenants and homeowners.
Following the national vote of September 28, 2025, Switzerland decided to abolish this system. However, the change will not take effect immediately — implementation is expected no earlier than the 2028 tax year, as the reform also involves constitutional amendments allowing cantonal “object taxes” on second homes.
b) End of Deductions for Mortgage Interest and Maintenance Costs
Previously, homeowners could deduct both mortgage interest and maintenance or renovation costs (especially value-preserving and energy-saving work) from their taxable income. This was the main counterbalance to the imputed rental value.
Under the new system:
These deductions will no longer be available for owner-occupied homes.
Cantons will have some discretion to decide whether they allow limited deductions for renovations — potentially until around 2050.
Mortgage interest will only remain deductible for rented properties, not for one’s primary residence. Thus, individuals who no longer have taxable rental or lease income will no longer be able to claim any debt interest deductions in the future. However, within the scope of the general deduction, private debt interest of individuals who rent out and/or lease properties will remain deductible to a certain extent.
The determining factor is the ratio between the rented or leased properties and the individual’s total assets (the so-called proportional restrictive method).First-time buyers of an owner-occupied property will be entitled to a mortgage interest deduction limited to a maximum of CHF 10,000 for married couples and CHF 5,000 for other taxpayers. This deduction is available for a period of ten years. The private mortgage interest attributable to this property can be deducted to this extent in the first tax year following the purchase. In subsequent tax years, the maximum deductible amount decreases annually by 10% of the aforementioned maximum amount.
c) New Cantonal Object Taxes on Second Homes
To offset lost tax revenues, cantons will be allowed to levy a property tax (“Objektsteuer”) on owner-occupied second homes.
In other words, only primary residences will benefit from the abolition — second homes may even face higher taxes under the new framework.
d) Who Gains and Who Loses
The effects vary depending on individual circumstances:
Low or fully amortized mortgages: clear winners, as they’ll pay less income tax without losing much in deductions.
Highly leveraged or renovation-heavy properties: likely to lose, since the lost deductions may outweigh the benefit of no longer paying tax on imputed rent.
Cantonal differences: critical — each canton can decide how generous it remains with renovation deductions.
A higher interest rate environment could result in higher effective taxation for some groups compared to today.
2. Why “Renovate Now Before It’s Too Late” Is Not Necessarily an Idea to Rush into
Many homeowners think: “If I renovate now, I can still deduct the costs before the new rules take effect.”
While that sounds logical, it’s often less beneficial than it seems. A single tax deduction is nothing compared to the potential long-term gains of additional BVG contributions or investments in a diversified stock portfolio. Therefore, before rushing into unnecessary “now or never” renovations just to capture a short-lived tax advantage, take a step back and run the numbers. Compare your options carefully — in many cases, investing your funds strategically will create far greater financial benefits and flexibility over time than tying up capital in renovations with limited or uncertain tax impact.
a) Timing and Transitional Rules Are Still Uncertain
The reform will not take effect before 2028, and transition rules are not yet finalized.
b) Limited Tax Benefit vs. High Capital Commitment
Renovations provide a tax deduction only proportional to your marginal tax rate — the real benefit is often smaller than expected.
For example:
If you spend CHF 100,000 on renovations and can deduct CHF 30,000 as maintenance, with a 25% marginal tax rate, your tax saving is CHF 7,500. That’s modest compared to what you could potentially earn by investing that money elsewhere.
Investing CHF 100,000 in a diversified stock portfolio with an average annual return of 5% yields CHF 5,000 in the first year. The investment then benefits from compound interests every year — while remaining liquid.
c) Attractive Alternatives:
BVG Contributions, Stock Investments, Mortgage Reduction
Extra contributions to your pension fund (BVG) still bring immediate and guaranteed tax savings, plus long-term retirement benefits.
Stock or ETF investments typically generate higher long-term returns, especially when diversified globally.
It also makes sense now to review debts in relation to assets under the new legal framework.
d) Renovate When Necessary
If renovations are needed for safety, energy efficiency, to prevent structural damage, or already planned, they still make sense.
3. Practical Guidelines
4. Conclusion
The abolition of the imputed rental value marks a historic shift in Switzerland’s homeownership taxation. While it simplifies the system and benefits many long-term owners, it also removes the long-standing tax incentives for high mortgage debt and renovations.
For many home owners, the urge to “renovate now before deductions disappear” is driven more by emotion than by reason. In many cases, a BVG top-up, long-term stock market participation, or a reassessment of the debt-to-asset ratio — can offer better returns and greater flexibility.
A thoughtful, scenario-based approach — rather than a rushed tax-driven decision — will ensure that homeowners benefit fully from the new system when it finally takes effect.