Taxes & Co. Real estate gains tax

What you need to know about taxes when you purchase or renovate your own home.

by Felix Hauser 27 Sep 2016

When you sell your home, taxes become due. One of those taxes is the real estate gains tax, which, put simply, is a tax on the difference between the purchase and selling price. Both the tax rate of the canton in which the home is located and the length of time you owned your home are taken into consideration when calculating the real estate gains tax. The seller is liable for this tax if he sells the house. You should, however, be aware that the house itself acts as a guarantee for the tax. If the seller leaves the country or files for bankruptcy, the local authority will collect the tax from the new homeowner.

Real estate gains tax guarantee – protection for the buyer against payment

There is only one way to protect oneself against the payment of this tax: a real estate gains tax guarantee. This guarantee must be expressly noted in the purchase agreement. Check with the local authority to find out what the probable tax liability is going to be.

In the purchase agreement for a house worth CHF 1 million the following purchase price payment could be arranged: The buyer takes over the mortgage of CHF 600,000. The buyer pays CHF 50,000 to the local authority to cover the real estate gains tax. He transfers the balance of CHF 350,000 to the seller.

Are the costs of renovating a house tax deductible?

After purchasing a home many people want to remodel it. Are these costs tax deductible? The basic rule is that investments that increase the value of the home do not qualify as an income tax deduction. Only investments that preserve the value, or more precisely, that portion of the renovation that preserves value, are relevant for tax purposes.