Tax Deductibility of Mortgage Interest for Owner-Occupied Properties in Switzerland

Buying a home is usually done with a mortgage. This is a long-term loan from your own bank. This is paid off in monthly installments plus interest over the specified period. These installments can reduce the tax burden on finances.

Very important: The monthly installments cannot be fully deducted, only the interest. A calculation example: The monthly rate of 840 francs consists of a 800 franc loan with an interest rate of five percent (40 francs).

These 40 francs can then be claimed for tax purposes. Calculated over a year, this is 480 francs. Since interest rates are now rising again, this makes the mortgage more expensive on the one hand, but also leads to higher deductible amounts.

A very important point with mortgages is the so-called amortization. This means: All but two-thirds of the mortgage must be repaid within 15 years or by the time you retire at the latest.

Here’s another example: The purchase price of the property is CHF 800,000. 20 percent (160,000 francs) are self-financed in advance. This leaves 640,000 francs.

Two thirds (about 422,000) can wait until they retire, meaning that 218,000 francs have to be amortized.

This can be done through direct amortization, where the mortgage is paid off in monthly installments. With the debt, the tax-deductible interest also shrinks. The advantage: many people feel more comfortable and secure if they actually own their property.

The other way is indirect amortization. The money (the finances) is paid into the third pillar of old-age provision (3a or 3b). When you reach retirement age, the mortgage is repaid from this savings pot.

This way is tax-friendly for your own finances: On the one hand, higher interest rates can be deducted every year. On the other hand, payments into pillar 3a of the old-age provision can also be claimed for tax purposes.

If you live in the property yourself, you can of course claim many other costs for tax purposes. But here, too, an important difference must be observed: only value-preserving measures are deductible, but no value-enhancing measures.

In other words: If the house facade absolutely needs a new coat of paint after ten years, the costs for paint and craftsmen can be deducted. If, on the other hand, the roof is expanded with new rooms, this increases the value of the property.

The costs for this expansion can therefore not be deducted. Homeowners have the choice of claiming each receipt individually or using a flat rate.

Depending on the canton, this is around 10 to 20 percent of the imputed rental value. The older the house, the more extensive the renovation measures, and the more worthwhile it is to submit individual receipts.