Homeownership Taxation: Make the Most of Current Tax Deductions

On 28 September, Swiss voters approved the abolition of the imputed rental value for owner-occupied homes. As a result, the current tax deductions for maintenance and renovation work on owner-occupied residential property will eventually be abolished as well. Until the new rules come into force, homeowners still have an opportunity to benefit from the existing tax deductions by moving planned projects forward.

It has not yet been decided when the reformed property taxation system will take effect. The decision rests with the Federal Council, and the cantons still need to implement the necessary legislation. For many homeowners, now is therefore an ideal time to carry out planned renovation projects while the current tax rules still apply.

Assess Renovation Costs Correctly

Most homeowners are familiar with the distinction between:

• Value-preserving expenses, which are generally tax-deductible; and
• Value-enhancing expenses, which are generally not deductible.

Examples of value-preserving work include repainting the exterior façade, renovating a balcony, replacing carpets, shutters, or a garage door with equivalent alternatives.

In practice, however, many renovation projects include both types of expenditure.

Take a kitchen renovation, for example. Most of the costs may qualify as maintenance, but upgrading to higher-quality appliances, premium materials, or improved fittings generally constitutes value-enhancing investment. The additional costs associated with these upgrades are not tax-deductible.

The same principle applies to bathroom renovations. Replacing existing fittings with more luxurious or technically advanced alternatives is generally regarded as increasing the property's value rather than simply preserving it.

Typical examples include replacing a standard toilet with a premium Closomat system or installing an expensive rainfall shower instead of a conventional showerhead.

To avoid disputes with the tax authorities, it is advisable to document renovation projects thoroughly—not only by keeping contractors' invoices but also by taking before-and-after photographs.

This is particularly important because the burden of proof rests with the taxpayer if they wish to challenge the tax authority's assessment.

Thinking About a Conservatory?

Some building projects are regarded by the tax authorities as purely value-enhancing and are therefore not deductible from taxable income, regardless of the owner's perspective.

These include, for example:

• Converting an attic into additional living space
• Adding an extra bathroom
• Building a conservatory
• Constructing a swimming pool

Although these investments cannot be deducted immediately, they generally increase the property's acquisition cost for tax purposes and may therefore reduce real estate capital gains tax when the property is eventually sold.

Preferential Tax Treatment for Energy-Efficiency Measures

Investments that improve a property's environmental performance or energy efficiency currently receive favourable tax treatment.

Typical examples include:

• Replacing windows with energy-efficient models
• Improving façade insulation
• Installing a modern heating system
• Installing a photovoltaic (solar) system

The associated costs are currently fully deductible from taxable income.

Naturally, all expenses must be properly documented, particularly through invoices from contractors and suppliers.

Once the new property taxation rules come into force, these tax incentives will disappear for direct federal tax purposes.

However, the cantons will remain free to continue granting deductions for energy-saving and environmental measures until 2050.

Is an EV Charging Station Tax-Deductible?

The tax treatment of home charging stations for electric vehicles varies from canton to canton.

Most cantons allow only a partial deduction, if any.

In general, a deduction is only available if the charging station forms part of a bidirectional energy system. In other words, it must not simply charge the vehicle but also be integrated into a photovoltaic installation, allowing the vehicle's battery to serve as an energy storage system for the property.

Source: Treuhand | Suisse