Home ownership: property maintenance and taxes
Electricity, solar panels, mortgage interest – which property maintenance costs can you deduct from your taxes?
by UBS Insights
07 Jan 2022
The joy of owning a home is surely having a space you can call your very own. Though you may be bothered from time to time by the many bills you have to pay, as well as well the effort of maintaining the place. This can become truly annoying if you forget about tax deductions or plan the tax aspects of a renovation the wrong way. To minimize the chance of this happening, we've compiled the most salient points for you on property maintenance and taxes.
Maintenance work is tax-deductible, ancillary costs only partly
You can list all expenses necessary to preserve the value of your property as deductions in your tax return. These include invoices for gardening, painting or plumbing work as well as the cost of replacing building services such as heating, the washing machine or the garage door control. And don't forget premiums for building insurance or maintenance subscriptions for building services (e.g., service subscription for an elevator). You can also deduct contributions to renovation funds, provided that they are only used to cover maintenance costs for communal facilities. Certain cantons recognize property tax: this is commonly understood to be part of property maintenance and is thus also tax-deductible.
You can specify a lump sum or effective costs in your tax declaration – whichever is higher. A lump sum depends on the age of the property as well as the canton and is usually between 10 and 20 percent of the imputed rental value. If you specify the effective cost, you will need to prove your expenses with invoices and receipts – so keep everything. In the worst case, if the tax authority considers the expenses to be insufficiently documented or incomprehensible, they will only allow the lump-sum deduction. Incidentally, you do not need to provide supporting documents for the lump-sum deduction, and do not need to have incurred the expenses in full.
If you are planning larger renovation work, it is worth spreading construction over two years to split the progressive taxation into two tax periods. The construction work and invoices must in that case be clearly assigned to both years.
On the other hand, living and operating costs are not tax-deductible. In other words, what you spend on heating, electricity, wastewater and waste disposal, as well as phone and internet bills.
Investments made to increase value are also not deductible. If you were to install a new sauna or have a sunroom built, your expenses would not be deductible from your taxable income. Only later renovations of the sauna or the sunroom would be deductible.
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Energy-saving renovations are value-adding investments but are still tax-deductible. As part of the Energy Strategy 2050, the Swiss government introduced new tax deductions at the start of 2020 and decided, among other things, the following:
Eco-friendly and energy-saving investments can be spread over no more than three tax years.
If you replace an older building that is not energy efficient with a new, energy-efficient building of equivalent value on the same property, the replacement costs are tax-deductible.
If you have a photovoltaic or solar thermal system installed on the roof of your house, the associated costs for plumbing or roofing work are included in the tax-deductible expenses. Other plumbing or roofing work can also be deducted as part of building maintenance as long as the work is necessary and not just done to increase value, as would be the case for an attic expansion.
Anyone who lives in a property they own pays tax on what is known as “imputed rental value,” which is determined by the cantonal tax authority. If you have carried out an investment that increases the value of your home, such as a sunroom or an energy-saving renovation, your imputed rental value will be correspondingly higher in your next reassessment.
To lower the imputed rental value, you need a valid reason. This can be evidence that a property is underused, has been reduced in size or if there is a disparity between the income and imputed rental value. The practice is not the same in all cantons.
Many voices have for a long time been calling for imputed rental value to be abolished. This is currently being debated in parliament, but nothing has yet been decided. Another topic of discussion is how much tax deductions for debt interest would then be restricted.
Mortgages are fully tax-deductible
All forms of debt interest are tax-deductible, whether mortgages with a bank or other interest-paying loan. Establishing mortgage certificates counts as an investment cost and, like any other expenses for purchasing property or construction work, has a decisive influence on subsequent property gains tax. Are the costs for installing solar panels and the costs for a plumber and roofer tax deductible?
Amortizations are not tax-deductible if you hold the property as a personal asset. The federal tax authorities in many cantons also do not permit ground rent interest to be deducted from tax. However, you may do so if you rent out the property.
A good plan pays off
If you live in a property you own, there are many ways to reduce your tax burden. From mortgages and debt interest, energy-saving home renovations to value-preserving measures – all these expenses can be deducted from your tax return. It is important to address property maintenance and taxes in good time. Planning extensive renovations early often pays off. What is important is whether it is more tax-advantageous to split the construction work and thus the costs over several years. The joy of owning your own house is even greater if you prepare well!