Abolition of the rental value: real impact for real estate investors
The vote of 28 September 2025 marks a historic shift in Swiss real estate taxation.
The abolition of the rental value – expected to take effect no earlier than 2028 – does not concern only homeowners. It fundamentally reshapes the balance between private wealth and real estate investment. For investors, this is not a minor technical adjustment, but a structural change to the tax framework.
The Swiss system was based on a compromise: homeowners were taxed on a national income (the rental value of their property), while related expenses and part of their mortgage interest remained deductible. The reform breaks this balance. Homeowners will no longer be taxed on imputed income, but in exchange will lose most deductions. By contrast, investment property held as private or business assets retains its economic logic. Interest costs, maintenance expenses, and depreciation remain deductible for income-producing rental properties. The reform does not penalize rental real estate; rather, it removes the tax incentives previously attached to owner-occupied housing.
The key change lies in the new mechanism for deducting interest expenses. Until now, interest was deductible based on the return generated by assets. The new system breaks this economic link and ties deductibility to the structure of the assets themselves. In other words, deductions will depend not on investment returns, but on whether the taxpayer owns rental real estate.
This mechanism has important collateral effects for financial investors. Without rental property, interest expenses related to other private financing also become non-deductible. This applies in particular to Lombard loans used to finance securities portfolios. An investor heavily exposed to financial markets but without income producing real estate could therefore lose all interest deductions, even when the debt finances income-generating assets.
The chart below illustrates how the new system operates in practice. The greater the share of rental property, the higher the remaining interest deductibility. Conversely, a household owning only its primary residence must bear the full tax cost of its debt.
Simplified simulator – Deduction of interest expenses
| Wealth profile | Total assets | Rented properties | Rental ratio | Private interest paid | Deductible interest | Lost interest deductions |
| Active investor | CHF 5’000’000 | CHF 2’000’000 | 40 % | CHF 50’000 | CHF 20’000 | CHF 30’000 |
| Mixed investor | CHF 5’000’000 | CHF 1’000’000 | 20% | CHF 50’000 | CHF 10’000 | CHF 40’000 |
| Owner‑occupier | CHF 1’000’000 | CHF 0 | 0% | CHF 30’000 | CHF 0 | CHF 30’000 |
An exception is provided for first-time buyers. A transitional deduction is foreseen for the purchase of a first home, capped at CHF 10,000 for a couple and CHF 5,000 for a single person. This deduction is reduced linearly by 10% per year over a maximum of ten years, provided eligibility conditions continue to be met. While this softens the transition, it does not restore the previous tax advantage.
Property renovation further highlights the divergence between private use and investment. Federal tax incentives for energy-efficiency improvements will disappear for homeowners who do not rent their property, even as climate regulations tighten. Cantons may choose to maintain such deductions. Renovation expenses for rental properties, however, remain deductible. A surge in renovation activity is likely before the reform takes effect, potentially driving up construction costs. In the medium term, energy performance will become a key valuation factor: renovated buildings will command a premium, while energy-inefficient properties may suffer a lasting discount.
Secondary residences introduce additional uncertainty. Cantons may introduce specific taxes to compensate for lost revenue. Owners could therefore face both the loss of existing deductions and a new cantonal tax. Future returns will depend heavily on political decisions at the cantonal level.
In this context, holding property through a real estate company once again becomes a strategic consideration. A corporate structure preserves deductions and depreciation, but introduces double taxation, higher administrative costs, and greater legal complexity. Transferring property into a company can be expensive, depending on asset structure, property valuation, and cantonal rules. This is not a universal solution, but a planning tool that must be assessed case by case.
The reform professionalizes real estate taxation. It removes the leverage previously attached to homeownership and encourages a more rational, investment-driven approach. High-performing, renovated, and economically managed assets will be rewarded. Investors who anticipate these rules today may gain a lasting competitive advantage. The challenge is no longer simply acquiring real estate, but structuring assets intelligently in a transformed tax environment.
Tax structuring and planning on a case‑by‑case basis for the holding of real estate assets (direct/indirect ownership; cantonal legislation; property depreciation; interest deductibility; duration of the real estate investment; application of the tax shield).
For more information contact Anna Vladau, Bonnard Lawson – a Citywealth member.
Key Takeaways
- The abolition of the rental value will significantly change Swiss real estate taxation starting in 2028, affecting both homeowners and investors.
- Homeowners will no longer face rental value taxes but will lose most deductions, while rental properties will maintain their deductibility for expenses.
- Interest expense deductibility will shift from being based on returns to depending on the ownership of rental real estate.
- The reform may lead to increased renovation activity as homeownership tax incentives diminish and energy performance becomes crucial for property value.
- Investors must adapt their strategies to the new tax environment, possibly involving real estate companies for better deductions and asset management.
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