Water, heating, solar panels, mortgage payments: which expenses are tax deductible?
04 Apr 2017
As a homeowner, you have the great pleasure of living in your own home. However, as a homeowner you also have a lot of bills to pay. Repairs, insurance, maintenance, wealth tax and income tax can all weigh on your budget. It is important to carefully plan your finances in order to avoid nasty surprises and to be ready for unforeseen events. In addition, you should be aware of all the tax deductions you can take as a homeowner. Many homeowners are uncertain about what tax deductions they are entitled to and tussle with the same questions.
Are the costs for electricity, water and heating oil tax deductible as maintenance?
No. Expenses for heating oil, electricity and water, as well as costs for sewage, telephone and cable are all typical operating costs and may not be deducted as property maintenance costs. But if your oil heating system breaks down, for example, the costs for repair, spare parts or a new system are tax deductible.
Are the costs for a gardener, painter, etc. tax deductible?
Yes. In principle, you can fully deduct the expenses that fall under the category of renovation and maintenance. An exception to this are investments in improvements to your home; these expenses may not be deducted. For example, if you remodel your bathroom to turn it into a luxurious wellness-type spa, this would be an improvement. You have the choice of deducting the actual expenses you had or taking a flat-rate deduction. The flat rate varies by canton and age of the home, but it is usually 10 to 20 percent of the imputed rental value.
Are the costs for installing solar panels and the costs for a plumber and roofer tax deductible?
Yes. The installation of solar panels and thermal solar heating are deductible as energy-saving measures. The costs of a plumber are also deductible if the plumber was involved in the installation. Other work done by a plumber or roofer can also be deducted as building maintenance, unless the tax authorities say that this work was an improvement that enhances the value.
Does the imputed rental value rise after a renovation or energy optimization?
Yes, the imputed rental value can rise. Any work for energy optimization can be deducted, but such improvements often enhance the value of the property. If that is the case, the imputed rental value will be raised the next time the value of the property is appraised by the canton. With some energy-saving measures, it may even be that the tax advantage at the beginning could be offset by a higher imputed rental value.
Are there ways to lower the imputed rental value?
There is a lot of controversy about imputed rental values and the periodic adjustments to them. It is a topic of hefty debate. The tax authorities are very strict when it comes to reducing the imputed rental value. Reductions are granted only for compelling reasons, such as clear proof of under-utilization or if there is a mismatch between income and the imputed rental value. The amount of the imputed rental value varies from canton to canton, as does the authorities’ readiness to lower the value under given conditions.
Which receipts do I need to keep for my tax declaration?
In principle, you should keep all invoices, receipts and other documents that you need for your tax declaration. These documents are requested and reviewed by most tax authorities. In the worst-case scenario, if important documents are missing, or if the costs cannot be verified by the tax office, only the flat-rate deduction will be permitted. If you decide from the beginning to use the flat-rate deduction, it is not necessary to keep invoices and receipts.
Are interest payments, ground rent and other financing costs tax deductible?
Interest payments are deductible, regardless of whether they are mortgage interest payments to a bank or for some other kind of interest loan. Mortgage arrangement charges are classed as investment costs and, like all other expenditure for construction and purchase, play a role later in the taxation of real estate capital gains when the property is sold. You cannot deduct amortization payments if you hold the property as a private asset. Ground rent cannot be deducted from federal tax or from a significant number of cantonal taxes. However, if you rent out the property, the ground rent can be deducted.