1. Overview of Federal Taxation of Real Estate

Under Swiss federal income tax law, real estate affects the tax position of individuals mainly through:

• taxable rental income from letting property,
• les valeur locative imputée for owner-occupied property,
• déductions for maintenance, repairs and mortgage interest,
• treatment of capital gains (primarily covered at cantonal level, but relevant for business property).

Real estate is also included in the determination of richesse nette for cantonal and communal wealth tax purposes, but there is no federal wealth tax. The same tax return is used to assess both the Impôt fédéral direct and cantonal taxes.

2. Rental Income from Real Estate

For Swiss residents, revenus locatifs from real estate is generally taxable at federal level, including:

• rental income from Propriété suisse,
• rental income from foreign property, subject to treaty allocation and domestic relief rules,
• certain income from rights in rem or usufruct arrangements.

The taxable rental income is usually the gross rent received, minus allowable deductions for property-related expenses and mortgage interest.

3. Imputed Rental Value of Owner-Occupied Property

A distinctive feature of Swiss tax law is the taxation of an valeur locative imputée for owner-occupied property. Under this system:

• individuals who own and occupy their home are taxed on a notional rental income,
• the imputed rental value is intended to approximate the rent that could be obtained from a third party,
• the value is determined according to cantonal practice, but is relevant for the federal tax base as well.

The imputed rental value is included as income, but owners can deduct:

• propriété maintenance costs, et
• intérêts hypothécaires.

Policy discussions regularly revisit this system, but at present it remains a central part of Swiss real estate taxation at federal level.

4. Deductible Maintenance Costs and Other Expenses

Property owners can deduct certain expenses related to maintaining their real estate. For federal tax purposes, deductible items typically include:

• ordinary maintenance and repairs required to preserve the property’s value,
• costs for property management (administration fees, certain service charges),
• insurance premiums directly related to the building (e.g. building insurance),
• certain costs for energy-saving measures or value-preserving renovations, depending on current rules.

In practice, many cantons (and thus for federal tax) allow taxpayers to choose between:

• a lump-sum deduction based on a percentage of the rental income or imputed rental value, or
• deduction of actual maintenance costs supported by invoices.

Value-enhancing investments (e.g. adding a floor or luxury upgrades) are generally pas deductible as maintenance, but may be relevant for capital gains tax at the cantonal level.

5. Mortgage Interest and Debt Financing

Intérêts payés sur mortgage loans is usually fully deductible at federal level, subject to the general limits for private debt interest. This includes:

• interest on mortgages secured on Swiss property,
• interest on mortgages for foreign real estate held by Swiss residents,
• interest on other loans used to finance property purchases or renovations.

Overall, private debt interest deductions are limited and may not exceed:

• taxable investment and real estate income plus a modest allowance based on net wealth, according to DBG rules.

Mortgage interest is an important planning lever, especially in combination with imputed rental value and maintenance deduction options.

6. Business Real Estate and Self-Employment

Where real estate is held as a business asset (for example by a sole proprietor or partnership), the federal tax treatment follows business tax rules:

• rental income from business real estate is part of bénéfices des entreprises,
• maintenance, insurance, property taxes and other expenses are deductible as dépenses professionnelles,
• depreciation may be claimed on the building at accepted tax rates.

When business real estate is sold, capital gains are usually considered part of taxable business income at federal level, even if a cantonal property gains tax also applies.

7. Real Estate Capital Gains at Federal Level

For private individuals, the taxation of capital gains on real estate is primarily a question cantonale. Most cantons levy a separate impôt sur les plus-values immobilières on gains realised upon sale of real property.

At federal level:

• capital gains on private real estate sont généralement not taxed as income,
• gains on business real estate (allocated to a business) are treated as revenu imposable,
• special rules may apply when a property is transferred from business to private assets or vice versa.

The interaction between cantonal capital gains tax and federal income tax can be complex in business cases, and double taxation must be avoided through coordination of basis and timing.

8. Foreign Real Estate and International Allocation

For Swiss tax residents owning real estate abroad, the allocation rules under double tax treaties and Swiss domestic law are crucial. Typically:

• real estate is taxable in the state where it is located (source state),
• Switzerland often applies the exemption avec progression method at federal level, meaning:
  • foreign property income is exempt from Swiss federal income tax, but
  • is included when determining the tax rate on Swiss income.

Nevertheless, foreign property and associated debts are usually included in the calculation of Swiss impôt sur la fortune at cantonal level and the progression for federal income tax, even if the income itself is exempt.

9. Interaction With Cantonal Property and Wealth Taxes

Real estate taxation cannot be analysed at federal level alone. Key cantonal aspects include:

• impôt sur la fortune on the value of real estate,
• cantonal and municipal l'impôt sur le revenu on rental and imputed rental income,
• impôt sur les plus-values immobilières on sales,
• in some cantons, separate impôts fonciers on ownership.

The overall burden for property owners varies considerably between cantons. For a comparative view, see: Impôt suisse sur le revenu par canton .

10. Practical Considerations for Property Owners

To manage federal taxation of real estate effectively, individuals should:

• retenir rental contracts and annual rental summaries,
• garder invoices for maintenance and renovation work, with clear distinction between value-preserving and value-enhancing items,
• keep annual mortgage statements showing interest and principal,
• verify the valeur locative imputée assessments and challenge them where appropriate,
• review tax implications before selling or reclassifying property (e.g. from business to private use).

For cross-border owners, it is important to coordinate with foreign tax rules and double tax treaties to avoid double taxation and optimise the timing of transactions.

11. Next Steps and Related Guides

Real estate taxation interacts with several other elements of the Swiss Direct Federal Tax. To complete your analysis, you should also review:

• Revenu imposable selon le droit fédéral suisse – including rental and real estate income,
• Déductions fiscales fédérales – especially debt interest and maintenance deductions,
• Revenus exonérés et non imposables – including capital gains rules,
• Aspects fiscaux internationaux et conventions de double imposition – for foreign real estate,
• Guide de l'impôt sur la fortune en Suisse – for the net wealth implications of property ownership.

Ensemble, ces guides fournissent une practical, English-language overview of how real estate is treated in the Swiss federal income tax system.