Short term I will benefit from this however longer term not so sure. For me the breakeven tax wise is at a 1.4% interest rate so not too close if rates go up again. I am also concerned about the longer term effects on the housing market especially on older units…
1 Like
Hah, think again! In Greece you have imputed income tax if you have a car over 1800cc, a boat, a pool…because…reasons…well, because if you have a >1800cc car you must have a certain income, and must be hiding it, so they tax you preemptively, regardless of whether you earn millions and live in a mansion or you eat pasta 365 days a year and live in a shed, to afford the Ferrari parked outside. Ok, not Ferrari, impractical, but something that’s not dead on wheels anyway 
As I commented above in this thread, seeing the level of disagreement on this very financially astute forum confirms my agreement with the Greek constitution that economic matters should never be up for referenda.
As a foreigner with zero interest in RE anywhere, especially not in CH, my interest here is mostly educational, but I agree, imputed anything sounds pretty vindicative and third world to me.
7 Likes
I assume your mortgage is only around 33% of the value of the property. If it was higher, it’s my understanding that banks want you to pay back down to around 33%.
Wrong understanding AFAIK.
Your debt should not represent more than 65% of your property value at retirement age, which is very different from repaying 35%.
Because at retirement age, your 80% mortgage on purchasing price you haven’t repaid might as well represent 40% of the current property value 20 years later, so you are well within the rules.
That’s why debt is an hedge against inflation.
3 Likes
Mmmh didn’t get that one. If no imputed rental value how might we benefit from swapping houses?
-
I buy a house and live in it with no imputed rental income.
-
I rent a house to my friend and they rent theirs to me, I pay a rent, get a rent, and get taxed.
How has it benefited anybody?
That is exactly the point, and you don’t even need to wait retirement age. With the assumption of 4% CAGR for the property price, starting at 80% LTV, you only need 5/6 years for your equity in the house to represent more than 35% of the total. And that is with indirect amortization. So, 5/6 years down the line, you are also free to move your 3rd pillar to any bank of your choice (or just stop contributing if you want so) and KEEP what you have paid till then.
80% LTV and indirect amortization for the most part. I think I’ll have to pay around 8k per year in direct amortization since the max contribution on my wife and my 3rd pillar is anyway capped at around 14k. This should bring the 35% ownership timeline even closer than 6 years.
General thought referendum: This is a very tricky statement. If you start restricting referenda for whatever (however vaild they might be) you will end up with tons of special interest groups making claim on why their topic should or should not be up for referendum. Yes, having (almost) every topic potentially up for referendum will sometimes result in discriminating or unfair outcomes. But in total (this is my personal opinion), referenda lead to overall better laws.
3 Likes
I agree on the principle of freedom, in an ideal world where people are equally well-informed, have critical thinking abilities and are rational, bit like the efficient market hypothesis
Switzerland does it better than most (better than all even?)!
On topic, the below would be me:
1 Like
Remove the car, add a window that’s pretty perfect.
3 Likes
Well, it likely will have an effect on you (beyond educational), unless you don’t own, don’t rent and don’t pay taxes in general.
Time (after 2028) will tell how much of an effect.
1 Like
For sure, I understand that, but given it’s beyond my control I don’t mind at all!
Before, with inputed rental income, (in theory) it did not matter whether you were actually renting your home or not, the same taxes would be levied. There were no tax benefits to either being a renter or owner-occupier. You could freely swap living with another owner-occupier, thus both becoming renters of each other, without any tax consequences.
(Of course, this is all in theory, in practice inputed values were already far lower than actual rents, so there was already a tax advantage to being an owner-occupier.)
But now with the change it is beneficial tax-wise to be an owner-occupier, not just in practice but fundamentally in theory. As a renter you pay the income tax of your landlord on your rent.
If we go back to the people having swapped homes and being renters of each other, by swapping again, they will decrease their living costs by no longer having to pay the income tax (on their rent) of the other.
2 Likes
Oh I got it, so imputed rental value was fair because it implied that it would be tax equivalent to swapping homes between two owners and rent it to each other. If it’s a fairness issue in that very case we could also consider rent as tax-free income. Why homes and not cars, computers, phones?
To sum up, the proof the law was fair is that if I live at my neighbor and vice-versa, tax should be the same as living in my home. Which is really what everyday’s people do.
Well actually that’s also a solution for people regretting rental value income tax. With the new law, swap homes with your neighbor, you’re back to paying taxes on a rent you actually get this time, and get all the perks with it… interest…and so…hum
I’ve never considered it fair or logic but the system “worked” and that’s why I was not so biased against it but I’m surprised how some people find it logic.
Homes are limited due to land being a limited resource. You can always make more cars, computers and phones. I thought the tax was a very good thing from the point of view of: economic rationing of a limited resource; and avoiding distortion between owner occupation and rental.
5 Likes
I’m pretty sure it will happen. The property owners who voted to abolish EmW might come to regret it when the tax raids come for homes some time in the future and EmW is no longer there as a shield.
1 Like
Property taxes and real estate
There are 12 cantons in which property taxes are levied on houses, apartments, and other properties. In six of these cantons, property taxes are only levied by some municipalities. The terms used to describe property taxes varies between cantons. In every case, property taxes are levied on an annual basis.
Like wealth tax, property tax is a tax on the value of your property. But unlike wealth tax, you cannot deduct mortgage debt.
https://www.moneyland.ch/en/taxes-real-estate-property-switzerland-guide
1 Like
At the end of the day, taxation is often arbitrary and unfair.
It’s about what’s practical, and what gives you as little unwanted distortions as possible while still raising enough money and applying the burden on those that can handle it.
Income tax for instance is very practical, but the distortion effects can be pretty nasty: a doctor which reduces their working hours because they do not feel working more makes sense due to progressive income tax is a very bad outcome for society.
In that sense, the inputed rental income was pretty good. It was about correcting the distortion effect of income tax on renting, and had thus no unwanted effects on its own. It was also progressive since it added to (the progressive) income tax, unlike for instance a property tax. And it mostly targeted people who had the means to pay it.
If it’s a fairness issue in that very case we could also consider rent as tax-free income.
We could of course, but tax money needs to come from somewhere. Is increasing income tax rates or VAT a better source of funds? I’m not convinced. Wealth tax? Maybe.
Why homes and not cars, computers, phones?
I agree it’s pretty arbitrary, but it’s also about what’s practical. Phones would be hard to track and bring peanuts. Cars would not necessarily be a bad idea, but it would be just too unpopular. Also as Phil said, homes are a limited resource, so encouraging fair use of it by not penalising renting (and thus not biasing against people moving when it would suit them) is a good thing in my books.
The arbitrariness is not unique either. You and your neighbour doing each other favours is all good and well, but if you and your neighbour are in the trades, and you exchange renovating the kitchen for the bathroom, then suddenly it’s tax fraud.
6 Likes
People living in a Baugenossenschaft would in that case have to pay partial imputed rent value – there’s no income tax paid by Genossenschaften.
As owner of an older house, for now it seems I’ll be off budget neutral, though with new Zurich house values I guess I might win out in the end (current mortgage 40% of valuu).
I agree: tax is arbitrary and unfair and very biased by definition.
And I don’t feel skilled enough to tell which one is a better option, I voted accordingly.
As unfair and illogical it looks to me I felt it was part of a working system, and the fact people voted doing their own personal calculations without taking the global picture into account might have side effects everyone can regret.
However, I can’t grasp the logic of “it’s very simple you rent to yourself so you pay taxes, see, it’s very fair”. I saw it more like a progressive tax property, despite the fact property tax DOES ALREADY EXIST in many places in Switzerland (@PhilMongoose @DrGEE Removal of imputed rental value - #364 by JEPG ).
1 Like