Income Tax
Owning real estate influences your income taxes in two ways. First you are subject to taxes on the rental value of the property that you use, because the revenue office calculates this rental value as fictitious income from home ownership. On the other hand, you can deduct the mortgage interest as well as the cost of maintenance from your taxable income. The calculation of the rental value and the deductible maintenance costs vary from canton to canton.
Asset Tax
Your property is subject to asset taxes. The tax liability is calculated not based on market value, but instead on the tax-assessed value of the property. However, you can deduct the amount of your mortgage from this amount.
Direct Amortization
With direct amortization a uniform amount is repaid to the mortgage each year. Your mortgage debt is reduced year after year by this amount. In this way, your financial cost for mortgage interest is also reduced.
Indirect Amortization
With indirect amortization the mortgage debt remains unchanged. You make payments not to the mortgage, but instead to a Savings 3 Account at the bank. The balance in the 3rd pillar is tax-advantaged, which means that you can deduct the amount paid into it from your income on your tax return. At the same time, the mortgage interest charge remains high, so that you have the full tax advantage related to mortgage interest. The paid in capital is used for repayment of the mortgage at the latest when you retire.
