What is rental value?
The rental value, officially called “rental value for owner-occupied property,” is a kind of fictitious taxable income in Switzerland. In practical terms, if you own a home that you live in, the tax authorities consider that you are “paying” rent to yourself, and this theoretical amount becomes taxable as if it were actual income.
The rental value of a property corresponds to a percentage of the market rent for comparable properties and must be declared as income in all cantons if the property is not rented out. In practice, the rental value ranges between 60% and 70% of the property's estimated annual rental income.
Why a rental value?
The theoretical basis of the rental value is rooted in a logic of fiscal fairness. Taxing the rental value offsets the advantage homeowners have over tenants, since they don’t pay rent and can deduct part of their housing costs (mortgage interest and maintenance expenses) from their taxable income.
What are the advantages of such a reform?
Abolition of a controversial “fictitious income”
The first advantage—and arguably the most symbolic one—is the elimination of what many homeowners see as a fundamental tax injustice. Homeowners often question why they are taxed on income they consider “fictitious.”
This sense of injustice is even stronger given that homeowners receive no actual income from their primary residence. Yet they are still required to declare and pay taxes on a theoretical amount, creating a tax burden on a non-existent gain.
Tax relief
The main beneficiaries of the abolition of the rental value would be retired individuals living in older properties purchased at a favorable price, with most of the mortgage already paid off and only minimal maintenance work carried out. They could reduce their tax burden by roughly one-quarter.
Supporting home ownership
The reform includes specific measures to encourage first-time buyers: first-time buyers will benefit from a specific deduction for the purchase of a first home, amounting to CHF 10,000 for married couples in the first year, then decreasing linearly over ten years.
This measure would facilitate access to home ownership for young households, in line with a housing policy objective.
What are the drawbacks?
Maintenance costs for real estate would no longer be deductible at either the federal or cantonal level for owner-occupied homes. This removal represents a significant financial loss for homeowners who regularly carry out maintenance, renovation, or improvement work.
Regarding the deduction of passive interest, the Federal Chambers agreed on a solution that limits deductibility to cases where there are rented or leased properties (the so-called restrictive proportional method).
Conclusion
The abolition of the rental value tax is undeniably one of the most ambitious and controversial tax reforms in modern Swiss history. After a century of existence and seven years of fierce parliamentary debate, this system born of an economic crisis could finally disappear, taking with it one of the tax mechanisms most criticized by Swiss taxpayers.
Almost two-thirds of households do not own their own home, and have no interest in seeing the system change. This reality represents a major challenge for popular acceptance of the reform. Supporters will have to demonstrate that abolishing rental value benefits society as a whole, not just homeowners.
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