Abolition of Imputed Rental Value 2029: Five Measures for Homeowners

The Swiss electorate approved the change in the system of property taxation in autumn 2025. As of January 1, 2029, the imputed rental value for owner-occupied properties will be abolished; in return, deductions for maintenance as well as for mortgage interest on owner-occupied homes will also be eliminated. In April 2026, VZ VermögensZentrum pointed out that many homeowners underestimate the financial consequences. Those who use the remaining two and a half years can align their tax burden and their mortgage strategy much better with the new regime.

What the System Change Specifically Means

The imputed rental value will be abolished at the federal level and in all cantons for owner-occupied primary and secondary properties. As a result, deductions for maintenance, value-preserving investments, insurance premiums, and management costs on one’s own property will also be eliminated. In the future, mortgage interest can only be deducted in relation to taxable income from investment assets, meaning in practice only if rental properties, securities, or shareholdings generate income. In many cantons, deductions for heritage protection measures and energy renovations with ecological impact will remain. In parallel with the reform, a cantonal property tax on second homes will be introduced, which will be defined by the local cantons.

Measure 1: Bring Forward Renovations Before 2029

Those planning major renovations should take full advantage of the tax effect before the cut-off date. Until the end of 2028, value-preserving expenses such as roof renovation, window replacement, kitchen or bathroom remodeling can be deducted from taxable income, but after that, in most cantons, no longer. It is important to distinguish between value-preserving and value-enhancing work: Only the value-preserving portions are currently deductible; value-enhancing work can only be claimed when the property is later sold for capital gains tax purposes. In the case of extensive projects, it is worthwhile to spread them over several tax years to break the progression. The combination with the flat-rate deduction should also be reviewed annually, as this can be claimed without supporting documents and may be more favorable than the effective deduction in years with lower income.

Measure 2: Review Amortization Strategy

The previous rule of thumb for many was: leave your mortgage as is, since mortgage interest was deductible and the tax burden partially offset the imputed rental value. With the elimination of these two effects, the calculation fundamentally changes. Those who do not declare further investment income can no longer deduct mortgage interest, but at the same time the imputed rental value burden is also eliminated. Higher amortization hardly brings any more tax disadvantages, but also no compelling advantages, as the opportunity cost of tied-up liquidity remains high. Those who have so far allocated free funds to indirect amortization via pillar 3a or occupational pension plans should not change strategy reflexively: the tax benefits of paying into a pension remain and are independent of the owner-occupation regime. A recalculation with one’s personal marginal tax rate and realistic return expectations will clarify whether direct amortization, pension savings, or free investment is most sensible.

Measure 3: First-Time Buyers Should Use the Temporary Mortgage Interest Deduction

The reform provides for a transition rule for first-time buyers: Anyone buying an owner-occupied property for the first time may claim a reduced mortgage interest deduction for ten years. The deduction is tapered off linearly and is highest in the first year. For young families with high mortgage rates and low equity ratios, this is a welcome relief during the financially toughest phase. Anyone acquiring a home before 2029 should clarify with the tax administration whether they are considered a first-time buyer within the meaning of the transitional provision, as the definition is still being clarified at the cantonal level. When choosing between a fixed-rate mortgage and a SARON mortgage, it is worthwhile to calculate the entire ten-year period: a longer fixed-rate mortgage provides predictability, but the deduction is only a mitigating factor and should not be the main criterion for product selection.

Measure 4: Multiple Owners and the Proportional-Restrictive Method

Anyone who owns additional properties besides their own home, such as a rental apartment or a multi-family house, will continue to be treated differently for tax purposes. Rental income remains taxable, maintenance and management expenses for rented properties as well as the corresponding share of mortgage interest remain deductible. The proportional-restrictive method applies: mortgage interest is allocated in proportion to asset values, and only the share attributable to income-generating assets is deductible. Owners should check the allocation of their mortgages and, if necessary, adjust so that as much debt as possible is allocated to rental properties. With several properties, it is also worth considering the ownership structure, for example, whether the rental property would be better held through a real estate company.

Measure 5: Replan Liquidity for Retirement

Retirees with largely paid-off homes benefit most from the new system: Until now, they had to pay tax on the imputed rental value without being able to offset it with mortgage interest, and from 2029 they will see relief. Nevertheless, not every strategy is optimal. Those approaching retirement and expecting large payouts from their pension fund or pillar 3a should consider tax progression in the years of withdrawal and consider staggering withdrawals. It is also important to have a reserve for affordability, since banks still use imputed interest rates of around 4.5 to 5 percent to calculate affordability. If you have to renew your mortgage during retirement, you will need sufficient income or realizable assets. A liquidity plan over ten to fifteen years, combined with a realistic amortization calculation, provides security.

What Remains Unclear Until the Cut-Off Date

The key points of the reform have been determined, but some details will be specified over the next few months in the cantonal tax laws. These include the amount and structure of the new property tax on second homes, the precise conditions for the first-time buyer deduction, and the treatment of transitional cases such as renovations that start in 2028 and are completed in 2029. The Federal Finance Department is expected to adopt the implementing ordinance in 2027. Until then, it is advisable to stagger major decisions and review them annually with a trustee or tax advisor.

Source: VZ VermögensZentrum, April 2026.