Tax implications

30.03.2020

The tax authorities make a distinction between investments which maintain value and those which increase value. Here's a tip: turn your home-decorating dreams into reality only as long as you have a reasonable amount of earned income. As a rule, you can possibly profit from additional tax deductions.

Maintain value

In the year when you carry out renovations you can take a deduction on your income tax statement. Make sure to combine smaller value-maintaining renovations so that the total costs for these are clearly above the flat-rate amount which can be deducted for maintenance expenses.

With larger value-maintaining renovations, in some circumstances you should proceed in stages so that you can spread out the deductions over multiple years and thus avoid any move into a higher tax bracket. Here's it's smart to get advice from a tax consultant or your bank.

Dumont regulations partially still in effect

If the property has not yet been in the real-estate owner's possession for five years, in certain cantons at this time value-maintaining renovations can only be deducted to 50 per cent. This is based on Dumont regulations, which however have been abolished by the Federal Parliament.

This abolition is already in effect for direct federal taxes and in the cantons at the latest starting in 2012. Check with your tax authorities how this is being handled in your canton.

Renovations which increase value

These cannot be deducted. However, the value of a home goes up through investments which increase value. The revaluation is performed by the building insurer whereby this leads to a higher property value and also to an increase in the imputed rental value.

When it comes to a later sale, investments which increase the value also play a role when calculating the real estate profit tax. Thus be sure to retain all records and invoices related to construction.

Financing