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What do I need to know about taxes?

Property transfer tax, imputed rental value, deductions, wealth tax, real-estate gains tax, and other aspects

A new home - what do I need to know about taxes

The purchase of a house or a condominium brings changes to your life. For one thing, there are several things to consider when filing your taxes. We have listed the key points here for you.

  1. Property transfer tax
    The first thing you will face is the property transfer tax. It is due upon purchase of a property and in the Canton of Basel-City usually amounts to 3 percent of the assessed property value, which normally corresponds to the purchase price. With a new purchase and a replacement purchase of owner-occupied property, the tax rate is reduced to 1.5%; respectively, half of the buyer’s portion typically does not have to be paid.
  2. Imputed rental value
    A Swiss specialty is the imputed rental value of a property. The imputed rental value represents theoretical income that is added to your income from other sources, such as your salary, etc. The imputed rental value is intended to correspond to the amount that you would receive as owner if you rented the property to a tenant. Note: extensive modifications or renovations can result in an increase in the value of the property and therefore also in the imputed rental value.
  3. Deductions from taxable income
    The imputed rental value increases your taxable income; in return, you can deduct the costs of upkeep of your property from your income. For maintenance costs, a flat-rate deduction can be made, or you can itemize the actual expenses for upkeep in your tax return. Costs for maintenance work can usually be deducted if they are value-preserving in nature; for example, replacing an old bathtub. Value-adding work, such as the installation of a whirlpool, on the other hand, is usually not deductible. Many tax offices publish lists that you can refer to in order to determine whether specific maintenance costs are deductible.
  4. Wealth tax on properties
    All cantons impose a tax on your assets - now your house or your condominium is a part of your assets. The deciding factor here is also the assessed tax value of your property; documented debts on the property reduce the value of the asset.
  5. Real-estate gains tax
    If you want to sell your property some day, you must pay a real-estate gains tax. This tax was introduced by many cantons to promote speculation with real estate. If you earn a profit from the sale of a property (compared to the purchase price when it was bought), a tax will be assessed on that gain. This tax depends on many factors, including the length of time that the property was used.

Clarify the tax aspects before you buy

For you as a new homeowner, therefore, the imputed rental value and the potential tax deductions play an especially important role. The assumption that property ownership always leads to lower taxes is not always correct. The amount of the taxes to be paid periodically depends on the imputed rental value, but also on the type of expenses you incur for upkeep, renovation, or expansion. Gather information before you buy from your bank and from the cantonal tax office concerning what additional factors will affect you when you purchase the property.