On 28 September 2025, the Swiss electorate approved a constitutional amendment with 57.7 percent of votes in favor and 16.5 cantonal votes. This reform abolishes the deemed rental value on owner-occupied residential property and grants cantons the authority to introduce a specific property tax on secondary residences. With this decision, a decades-long debate comes to an end, marking a fundamental shift in the taxation of homeownership. Until now, homeowners were required to declare and pay income tax as if they were renting out their own property. With the reform, this taxation method is abolished entirely. For homeowners, the reform entails profound tax changes that are expected to take effect from 2028.
With the abolition of the deemed rental value, deductions for maintenance costs are also abolished. Investments in energy-saving or environmental protection measures will no longer be deductible at the federal level, although cantons may allow such deductions until 2050. Deductions of preservation work on historical monuments remain permissible, provided they are officially mandated and not subsidized.
The deductibility of interest is significantly curtailed. Interest may only be deducted if there is corresponding taxable rental or lease income. A quota model applies, whereby the deductible share is calculated in proportion to the rented properties relative to the taxpayer’s overall assets. As a result, private debt without investment income will largely lose its tax advantage. An exception applies for first-time home purchases, where a limited deduction may still be granted for a transitional period.
To compensate for the loss of tax revenue, particularly in tourism regions, cantons are authorized to levy an additional tax on privately used secondary residences. The design and implementation of such taxes remain within cantonal discretion.
The reform creates both relief and new burdens. While the deemed rental value disappears, many former deductions are eliminated. Owners with heavily mortgaged homes are likely to be more affected than those who are debt-free. Investors with rental properties must review their financing structures in light of the new quota rule. From a tax perspective, it may be advisable to bring forward planned renovations, restructure mortgages, and closely monitor cantonal legislative processes.
Fortunately, the Finance Directorate of the Canton of Zurich has announced that, in light of the referendum outcome, it intends to forgo the increase in deemed rental values that had been scheduled for 1 January 2026.
Deemed Rental Value: Finance Directorate Intends to Waive Planned Increase
The abolition of the deemed rental value represents a historic milestone in Swiss tax law. It abolishes a system that has long been controversial but at the same time introduces significant adjustments for homeowners. Whether the reform proves advantageous or disadvantageous will depend on individual circumstances such as wealth structure, financing, property location, and personal life plans. What is certain is that those who assess their situation early, seek professional advice, and follow cantonal developments closely will be best positioned to minimize risks and seize opportunities.
