during last year we were going through big renovation project - still not finished . We have already paid significantly more than our yearly income. As now it’s the time for tax declaration, I wonder if anyone can share their experiences how tax authorities are going to classify such works (especially in VD, but info how it is treated in other cantons can be helpful too), knowing that the works which are increasing the value of property are not tax-deductible (unless they are not related with increasing energy efficiency).
We have tens of invoices to report. In “Frais d’entretien effectifs” there are several fields to fill for each invoice, eg. “Nature des travaux”, “Montant net de la facture”, “Plus-value / Subventions”. Can anyone suggest what would be the best way to do it? Eg. should I look into each invoice and try to guess which expenses can be counted as keeping value and which as increasing it and then report calculated number in “Plus-value / Subventions” field? Or rather just report everything, send them to tax authorities and let them to do the job? The best would be to report everything as one entry, not tens of different ones ;).
And big question - how they are going to assess it? Will someone really go through all invoices or will just say that some % can be counted as keeping value, while the rest as increasing it?
That’s not ideal. You should try to spread such cost into multiple tax years to make maximum use of progressive tax rates. Check also what applies exactly, as in many cantons they date of your payment is relevant, not the date of the services rendered (allowing for optimal tax management).
Yes exactly. Do not deduct things that are clearly value enhancing and not deductible. If the tax authority starts correcting, they typically go to the low end and you have to object and discuss, so you want your deduction proposal to be ambitious but not overly aggressive.
Generally, I would not be too worried with the specific data they ask per invoice. You can enter the sum and attach any list you already have, or you can summarize per suppliers, etc. Relevant are the invoices, and they will want to see them. They will check that it qualifies to be deducted and may have follow-up questions if unclear. I suggest to comment proactively on what renovations you have done this tax year to give them a good background and frame it correctly.
Yes, I know, we already tried to postpone some invoices for this year. On the other hand we wanted to finish as much as possible and start to live like people, not animals , so yeah, there were a bit contradictory requirements .
Many thanks for suggestions on how to report it in tax declaration!
As this seems quite a big project, did you have an architect to assist you? In this case the architect can draw a list of what was value adding and what was value preserving and you can hand it over as supporting document. This is what we did and everything got approved.
Btw I think there are some rules, i.e. a kitchen is expected to have a useful life of XX years. If you renovated it in XX/2 years then maybe it is hard to argue that this is value preserving…
On a more philosophical question, I see these deductions more as a deferred tax since assuming you sell the house at some point then the value preserving items will not count into deducting from your gains and you will be taxed with property gains tax. Obviously this has to do on the treatment of each canton and the relevant tax brackets but (assuming that hopefully RE prices go up) most probably you will need to pay taxes for these items in the future…
Hello, yes, we had an architect, thanks for the tip!
This is a very important point. Your architect will be able to split these although sometimes it’s not linear because he didn’t take these works separately into account in the CFC. The sum per CFC is certainly “a total”. Nevertheless I think he can estimate from the “soumissions” a percentage (rule of thumb) between maintenance works and renovation works that add significant value to the house.
For canton berne there is the leaflet no 5 issued by the cantonal tax administration giving quiet detailed answers to this questions.
I made a excel list with all the bills and took note which percentage according ti the leaflet is not allowed to deduct. It helps if the craftsmen made groups by work they did. E.g. a plumber bill with group kitchen and bath.
Unfortunately my plumber made a list about 4 pages long the all the fittings, tubes etc he used. Not easy to categorize them.
This is a Herculean situation and @newhere - I don’t want to steal your motivation - but I’m not sure this principle will give accurate results, especially since you also have to take into account working hours, and some actions can be related to both (e.g. kitchen and bathrooms). I can’t think of any company that clearly separates their working hours unless asked.
There are also some activities that are carried out by one company but are not directly related to that particular space/room/zone (e.g. the plumber has to unplug and plug the kitchen’s plumbing system, but it is another company that manufactures, installs and equips the kitchen).
Tip >>> However, for those who are planning to rebuild or renovate a house, this process can be taken into account when your architect draws up the tender documents and recruits the companies. You just need to “alert” him for that. (in French: clearly separate “founiture et pose lors de l’établissement des soumissions et l’appel d’offres”.
If you’re working directly with the company, most of the times they will give you a ‘total’ with little description or detail.