Declaring real estate on your tax return: how it works

Why must real estate be declared on tax returns?

Anyone who owns real estate in Switzerland – whether it is their own home or a rented property – must declare it on their tax return. The reason for this lies in the so-called equivalent rental value and the tax treatment of property costs and assets.

The following aspects are relevant for tax purposes:

• Equivalent rental value for owner-occupied residential property
  
• Rental income from rented real estate
• Deductible maintenance costs
• Debt interest on mortgages
  
• Insurance premiums (e.g., building insurance)

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List real estate in the asset inventory

Real estate is considered an asset for tax purposes. It must be listed in the asset inventory of your tax return. The value for tax purposes is usually the official value determined by the relevant cantonal authority.

Important information that must be entered:

• Address and description of the property
• Type of use (owner-occupied, rented)
  
• Cantonal tax value (official value)
• Mortgage balance at the end of the year
  
• Share in the case of co-ownership

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Declare the imputed rental value

If you live in your own property, you must declare the imputed rental value as income. This is a notional income that you would earn if you rented out the property.

The imputed rental value is usually calculated as follows:

• Percentage of the local market rent for the property in question (between 60% and 90%, depending on the canton)
• Influence of the location, condition, and size of the property

Some cantons grant relief or reductions, especially for pensioners.

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Rented properties: Rental income and deductions

In the case of rented properties, the rental income must be declared in full as income. At the same time, however, numerous costs may be deducted.

Deductible costs for rented properties:

• Maintenance costs (actual or flat-rate)
  
• Administrative costs incurred by third parties
• Debt interest (mortgages)
• Insurance premiums
  
• Levies such as property taxes

Note: In the case of major renovations, a distinction must be made between measures that maintain or increase value. Only value-maintaining work is deductible.

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Deducting maintenance costs correctly

Owners can choose between the actual deduction of the maintenance costs incurred and a flat-rate deduction (usually 10% to 20% of the imputed rental value).

Actual deductions:

• Proof required (e.g., invoices)
  
• Only value-preserving work is deductible

Flat-rate deduction:

• No proof required
  
• Regardless of actual expenses

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Claiming debt interest

Mortgage interest can be claimed as debt interest on your tax return. This applies to both direct federal tax and cantonal taxes.

Examples of deductible debt interest:

• Mortgage debt for your own home
  
• Debt for rented properties
  

Please note the limit: The deduction is only permitted up to the amount of taxable assets plus $50,000 (for direct federal tax).

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Declaring real estate abroad

Foreign real estate must also be declared in your Swiss tax return. Although foreign income is not taxable in Switzerland, it does affect the tax rate (progression).

Required information:

• Location and type of property
• Market value abroad (verifiable)
• Foreign rental income
  
• Mortgage debt abroad

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Value-adding investments: caution with deductions

Value-adding investments (e.g., adding a conservatory) may not be deducted as maintenance costs. However, they increase the investment cost base and may be relevant for tax purposes in the event of a subsequent sale (e.g., when calculating property gains tax).

Examples of value-adding investments:

• Converting the attic
• New kitchen with a significantly higher standard
• Extending the living space

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Tips for owners on tax optimization

• Keep all receipts and invoices relating to property costs.
• Check whether the flat-rate deduction or the actual deduction is more advantageous.
• Have official values checked regularly (e.g., in the case of major renovations).
  
• Take advantage of deductions for energy-saving measures, if provided for by the canton.

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Conclusion: It pays to declare real estate on your tax return

Declaring real estate correctly on your tax return is complex, but it also offers many opportunities for tax optimization. If you know the rules and proceed systematically, you can claim legal deductions and potentially save several thousand dollars. If you are unsure, it is worth consulting a tax advisor.