Which renovations are tax-deductible?

1. What are value-preserving renovations?

Value-preserving renovations (or investments) merely serve the upkeep of residential property. Without the related investment, the property would lose value or even become uninhabitable.

Façade renovation is just as much a part of this as a new roof, the replacement of the heating or renovations to the wastewater disposal systems. The replacement of built-in kitchen appliances, the maintenance of the garden, etc., are also considered value-preserving measures.

2. What are value-enhancing renovations?

Value-enhancing renovations create additional benefits and, as the name suggests, increase the value of a property. This applies, for example, to converting the loft or the addition of a garage or conservatory.

3. Which renovation costs can you deduct from your taxable income?

Depending on the type of investment, you can deduct renovation costs from your taxable income and benefit from lower taxes.

Value-preserving investments are tax-deductible

Like, for example, insurance premiums or administrative costs, value-preserving renovations fall under maintenance costs. You can deduct them from your taxable income. You have two options when it comes to deductible maintenance costs for your property:

• You can claim a flat-rate deduction.

• You can provide evidence of the actual costs.

The federal government and most cantons distinguish between two categories for flat-rate deductions: for properties less than ten years old, you can usually deduct 10% of the imputed rental value (or rental income). For older buildings, the rate is 20%.

In Appenzell Innerrhoden, St. Gallen and Zurich there is no age limit. 20% is always deductible here. In the canton of Vaud, you may also deduct at least 20% of the imputed rental value for owner-occupied properties.

For older properties (over 20 years), this figure even rises to 30%. In the canton of Basel-Landschaft, property owners can deduct 20% of their taxable income for properties less than ten years old, and 25% for older properties.

If the effective renovation costs exceed the flat-rate amount, you can claim the costs for tax purposes against proof (proof of effective costs). That's why you need to collect all the receipts. Check at the end of the year whether the actual renovation costs are really higher than the flat-rate deduction.

Value-enhancing investments are not tax-deductible

In principle, you are not allowed to deduct any value-enhancing investments from your taxable income. In the event of a later sale of the property (after renovation), you may, however, add this additional expense to the original purchase price. This reduces property gains (the ratio of investment costs to selling price).

Here, too, you must be able to produce all the supporting documents. Therefore, you will need to keep them for a long time.

Exception: energy efficiency investments

Energy efficiency investments are an exception to value-enhancing investments: these can be deducted from your taxable income over a period of two years. Ask the tax office about deductible green renovations.

Investments in energy efficiency measures may actually be doubly advantageous in some cases: some banks offer a reduction on base interest rates for Minergie-certified renovations.

4. Tip: stagger renovation work over several years

In the case of larger projects, it can pay off to divide the renovation work over two or more calendar years. This will break the tax progression over several years.

In such cases, you should properly coordinate and dovetail the individual jobs with each other. Calculate possible tax savings using the Comparis tax calculator.

5. Ask the tax office if anything is unclear

Not sure if renovations are value-enhancing or value-preserving? You can check with the tax authorities beforehand. The cantonal tax offices have corresponding leaflets.

In the individual cantons, there are often specific opportunities for tax savings on renovations. For example, the tax deduction for a renovation in the canton of Bern is subject to separate deductions for properties that are rented out with furniture. You should therefore always enquire directly about local cantonal deductions.

Would you like to increase your mortgage to finance renovations?