The end of imputed rental value: what should homeowners do now?

For decades, anyone living in a residential property that they own has had to pay tax on notional rent as a source of income. This is known as the imputed rental value. In return, maintenance work and interest on debt are tax-deductible.

This will soon come to an end, however, as Switzerland voted to abolish the imputed rental value and tax deductions on 28 September 2025. Even though the change in the system will not take place until 2028 at the earliest, homeowners should already be considering the implications now.

There are three key points to take account of:

1. Renovation work

Until now, maintenance work and ­renovations could be deducted from taxable income. This option will no longer be available in future. If you still want to benefit from the opportunity to make tax deductions, you should press ahead with any plans to carry out maintenance work or energy efficiency renovations until the system change comes into force, or move them forward if necessary.

As greater demand in the ­construction industry is expected, we recommend planning any construction work in good time.

Important: The cantons can continue to allow deductions for renovations until 2050. However, the measures must improve energy efficiency or eco-performance.

2. Renovation fund

If you live in a condominium, it may be worth temporarily increasing the contributions to the renovation fund. This is because these deposits will ­remain tax-deductible until the new regulation comes into force.

3. Mortgages

In future, it will no longer be possible to­ deduct interest on debt from your tax liability. A special rule applies to people who are buying residential property for the first time: they can continue to deduct a limited amount of interest on debt from their taxable income for a 10-year period.

Any early repayment or reduction of mortgages requires careful consideration. It is important you have sufficient liquid funds in the long term to remain financially flexible. If too much capital is tied up in the property, a cluster risk in the asset mix may be presented.

Having very high mortgage repayments may mean missing out on the opportunity to earn returns on ­financial investments. It is important to carefully consider whether it would be better to invest any disposable income in other assets.

­You need to keep track of your overall financial and asset situation so that you can make well informed decisions.

Marcel Müller is a customer advisor at Migros Bank and a mortgage expert.