Imputed rental value of a vacation home: an often overlooked deduction
Published on 16.03.2023 CET
Do you own a vacation home in Switzerland? Then this is likely to be located outside of your canton of residence. In this case, you can benefit from an often overlooked tax deduction on the imputed rental value. A few hundred francs in tax savings per year are not unrealistic. Find out here how much the deductions are and how you can claim them.
Whether it’s in Ticino, Graubünden, or Valais: Switzerland has many beautiful spots that are perfect for a cozy vacation home or apartment. However, when it comes to taxing your own vacation oasis, it can quickly become complicated. This is because each canton allows for different deductions when it comes to the tax-relevant imputed rental value. There is no set rule when calculating imputed rental value.
However, the cantonal differences do not necessarily have to be a disadvantage for you. If you own an owner-occupied vacation home outside your canton of residence, you may be able to benefit from attractive tax deductions in connection with imputed rental value.
“Some cantons, such as the Cantons of Graubünden, Nidwalden or Glarus, allow reductions of 20 percent or more on the imputed rental value.”
Important to know
The income from the property (including the imputed rental value) is always taxable in the place where the property is situated, i.e., in the canton where the vacation house is located. However, this only applies to taxes at cantonal and municipal level. At that level, the deduction is usually correctly taken into account by the authorities.
However, what is often forgotten is the deduction for federal taxes, which is assessed by the taxpayer’s canton of residence rather than the canton where the vacation house is located. Why?
As you only submit a copy of your tax return from the canton where you reside in the canton where you have your vacation home, this deduction will not automatically appear on the tax return if the canton of residence does not provide for such deductions and reductions.[1]
For example
- You live in the Canton of Zurich.
- You own a self-used holiday home in Davos.
- You are entitled to the Graubünden deduction on the imputed rental value.
- Nevertheless, you must actively claim it in Zurich so that it is taken into account for direct federal tax.
[1] While before the turn of the millennium you had to file a separate tax return for each canton in which you owned properties, nowadays, only a single tax return from the canton of residence is required. So, if you live in the Canton of Zurich and own a vacation home in Davos, simply fill out your Zurich tax return, and submit a copy of it in the Canton of Graubünden. The same also applies to other cantons.
Cantonal differences in tax rates
What is taxed is largely uniform throughout Switzerland. However, tax rates differ considerably. Municipalities and cantons have what is known as tax rate autonomy.
Income tax
Here, the maximum marginal tax rates vary between around 20 per cent (e.g., Canton of Zug) and around 45 per cent (e.g., Canton of Geneva).
Wealth tax
There are significant differences between the cantons when it comes to the maximum marginal tax rates: They are lowest in Nidwalden at around 0.1 per cent and highest in Geneva at around 1 per cent.
Let’s stick with the above example: You own an owner-occupied vacation home in Davos, but you live in the Canton of Zurich. You can claim a deduction of 20 per cent of the Graubünden imputed rental value value in the tax return of your canton of residence for the purposes of direct federal tax – and only for this tax.
Practical example
Deduct the imputed rental value from the vacation home
Calculated using an example with residence in Zurich and vacation home in Graubünden, which has an imputed rental value of CHF 30,000.
|
|
Imputed rental value of the vacation home |
Deduction on the imputed rental value: 20% |
Taxable imputed rental value * |
Tax burden for direct federal tax: 11.5% ** |
|
Without deduction |
30,000 |
— |
24,000 |
2,760 |
|
With deduction *** |
30,000 |
6,000 |
19,200 |
2,208 |
|
|
|
* After taking into account actual or estimated property maintenance costs.
** Maximum marginal tax rate.
*** In your tax declaration in Zurich as it would have been done in canton GR.
According to the above example, an amount of CHF 6,000 (20 percent of CHF 30,000) can be deducted in the Zurich tax return under “other deductions” with the note “deduction imputed rental value for federal tax”. Note that the amount is only listed in the column for the direct federal tax. At cantonal level, the deduction is usually correctly taken into account by the canton in which the property is located.
Do you have any further questions in connection with taxation and your vacation home? Our experts are available to assist you with Swiss tax-related questions and to help you optimize your personal tax situation.
Tax advice in context
If you are not familiar with the jungle of tax regulations, it is easy to fall into a tax trap. After all, not every taxpayer is able to keep abreast of possible “knowledge advantages” by being in direct contact with the tax authorities. Our experienced tax experts are able to negotiate Swiss tax issues of all kinds on an equal footing with the authorities and, where necessary, obtain binding tax rulings on your behalf.
Contact us, without obligation, to analyze your tax situation with our experts.