On September 28, 2025, Switzerland turned a new page in its tax system: the imputed rental value of owner-occupied properties was abolished. In return, cantons will be able to introduce a property tax on second homes used for personal purposes. With the elimination of numerous deductions, targeted exceptions for passive interest, and an implementation timeline still unclear, homeowners are wondering about the concrete consequences. Samuel Meylan, head of Swiss wealth management at Lombard Odier, clarifies the main issues at stake in this development.
The end of a system of deductions
First, let’s remember that until now, the situation was as follows: for both primary and secondary residences, a rental value is taken into account,
that is, a theoretical income from the use of one’s own property. This system allows, in return, a number of deductions: those for passive interest, building maintenance costs, and energy-saving measures.
With the elimination of the imputed rental value, these deductions largely disappear. “In fact, all the deductions we were entitled to until now will disappear,” Samuel Meylan explains from the outset. “Building maintenance costs will no longer be deductible; energy-saving measures will only be partially deductible. The deduction for passive interest will practically disappear.”
All the deductions we were entitled to until now will disappear
Debt and interest: a new framework
Regarding debts, Samuel Meylan further clarifies: “For wealth tax purposes, debts will remain deductible: you will still be taxed on your net worth. However, passive interest, whether it be mortgage interest, Lombard loan interest, family loan or consumer credit, will no longer be deductible.”
Two exceptions remain, however. “The first: passive interest related to the initial purchase of a primary residence remains deductible, but for a limited period. Furthermore, interest can be partially deducted when one owns an income-producing property, that is, a property rented to third parties.”
A decreasing deduction over ten years
This limited period is already known: “10 years, with a decreasing deductibility throughout these 10 years, i.e. a 10% reduction in the deduction each year. The first deduction is limited to 10,000 francs for a couple and 5,000 francs for a single person.”
For income-producing properties, the calculation will be more complex. “In fact, a simple proportion will be needed: we’ll look at the proportion that the income-producing property represents relative to total assets, and the interest will be deductible in that same proportion. Here’s an example: if I have assets of 10 million francs, of which 4 million are in income-producing properties (i.e., 40% of my assets), I will only be able to deduct 40% of my passive interest.”
Faced with these changes, should we repay our debts? Samuel Meylan is unequivocal: “Today, with interest rates being extremely low, I don’t think so. Generally speaking, we’re borrowing at around 1%. If we have financial assets invested, it’s more than likely that they’ll yield, even after tax, more than 1%. From an economic standpoint, it therefore doesn’t make sense to repay debts right now. I think that those who can choose between invested assets and debt repayment will remain invested in the financial markets.”
Maintenance costs and work to anticipate
The issue of maintenance costs also remains crucial. “Maintenance costs related to investment properties will remain deductible, as they are today. However, maintenance costs will no longer be deductible for either primary or secondary residences once the new rules come into effect. Therefore, if you have maintenance costs to plan for in the coming years, it is advisable to anticipate them in order to deduct them while it is still possible.”
For energy-saving measures, the system will be hybrid
Energy savings: a partial deduction
For energy-saving measures, the system will be hybrid. “The deduction will only disappear at the federal direct tax level and should remain at the cantonal and municipal tax level. However, if you want the full deduction, you need to plan ahead. This will also depend on the canton where the building is located. In the canton of Geneva, of approximately 40% of taxes, about 10% is related to federal direct tax and 30% to cantonal and municipal taxes. The bulk of the deduction is therefore cantonal and municipal. It’s very different in German-speaking Switzerland, where the distribution can be closer to 50/50. So, we will likely have a different approach in each canton.”
The date is not confirmed today; it is likely 2028, and some even suggest a later date.
The entry into force remains unclear.
As for the timeline, nothing is set in stone. “Today, the date is not confirmed; likely 2028, and some are even suggesting a bit later. This means we will have at least two years to carry out the tax-deductible work.”
The legal basis, however, is established. “The law itself, related to the elimination of imputed rental value and the end of deductions, is clear and has been passed. What is not yet clear, however, is the tax on second homes that the cantons can introduce to compensate for the losses linked to the end of imputed rental value. On this point, at this stage, cantonal legislators have not yet had the opportunity to debate; details such as the tax base and the rate are still unknown.”
Ultimately, the big winners of this new rule are those building new buildings today: for twenty years, they should not have to incur significant maintenance costs.
Consequences on the real estate market
In the longer term, this tax upheaval could impact the real estate market. “Older buildings that regularly require significant maintenance costs could attract fewer buyers, since the tax benefit will no longer exist. Ultimately, the biggest winners from this new rule are those currently constructing new buildings: for twenty years, they should not have to incur significant maintenance costs.”
