Rental Value, Imputed Rental Value, and Imputed Rental Income (Switzerland) – An Additional Advantage of Property Ownership in Germany
In Switzerland, property owners must include the “imputed rental income” of the property they live in as income (and in return can also deduct costs). This is not the case in Germany, except in family law, where the “monetary benefit,” here called rental value or imputed rental benefit, of an owner-occupied and therefore rent-free property is also counted as income.
This circumstance highlights the following: Renters must pay rent from their taxed income. Property owners not only save the absolute monthly rent amount, but also the taxes and social security contributions that renters must first earn and pay in order to use the remaining net amount to cover the rent.
Update 20.12.2024: The imputed rental value in Switzerland will be abolished. The taxation of property ownership remains significantly different from the situation in Germany.
Since inflation causes rents to rise and simultaneously devalues debt, the gap between renter and owner widens even more over the years than expected when including taxes and social security contributions.
Including Taxes Increases the Absolute Difference Between Rent and Purchase Costs
It is true that the owner also had to pay the interest and repayments of the property financing from taxed income.
However, these payments are only at the beginning; at some point, the property is paid off, while rent payments continue for life.
This increases the absolute gap between lifelong costs of property ownership and renting.
Simply put, if the acquisition costs are “1,000 EUR” plus 30% taxes and the rental costs over a lifetime are “1,500 EUR” plus 30% taxes, the owner’s advantage including taxes amounts to 1,950 EUR (1,500 + 30%) – 1,300 EUR (1,000 + 30%) = 650 EUR instead of, without taxes, only 1,500 – 1,000 = 500 EUR.
Living Rent-Free is a Tax-Free Monetary Benefit
Especially the fact that, on the one hand, rents rise over the years while, on the other, debts are devalued as prices and incomes increase, is often not considered in profitability calculations for (owner-occupied or rented) properties.
The fact that rent-free living in one’s own property is not taxed as imputed income is an advantage of property ownership in Germany.
Even with the associated possibilities of cost deductions (as in Switzerland), the net result would generally remain an additional financial burden.
Switzerland abolishes the imputed rental value
The Swiss Parliament has decided to abolish the imputed rental value for owner-occupied residential properties.
At the same time, the deductibility of loan interest will be restricted. This means that, in the future, no fictitious income (imputed rental value) will be assumed for owner-occupied primary residences, but the deductibility of expenses will also be limited.
For owner-occupied secondary residences, a new property tax will be introduced as a replacement. This tax is intended to compensate tourist areas for lost revenue from potential vacation rentals.