Abolition of Property Value Tax from 2029

Context

TL;DR

• Property value tax for owner-occupied homes abolished from 2029
• Cantons can introduce up to 3.5% tax on secondary homes
• Maintenance deductions for owner-occupied homes will disappear
• Mortgage interest deductions will be limited to rented portions

Key facts

• Effective Date: January 1, 2029
• Reform Approval: February 9, 2025
• Ticino Fiscal Loss: CHF 210 million annually
• Secondary Home Tax: Up to 3.5% on secondary homes
• Legislation Deadline: December 2028
• First-time Buyer Limit: CHF 5,000/year for 10 years on mortgage interest
• Energy Deduction Cap: CHF 15,000 per intervention in Ticino
• Non-residential Tax: Reduced property value tax of 50%

Abolition of Property Value Tax from 2029

The Federal Council confirmed on Wednesday the abolition of the property value tax for owner-occupied homes, with binding effect from January 1, 2029. The reform, approved by the people and cantons on February 9, 2025 with 55.7% of the votes, will definitively eliminate the property value tax at the federal, cantonal, and municipal levels. To compensate for the estimated annual fiscal losses of CHF 210 million for Ticino (source: Department of Finance and Economy TI), the cantons will be able to introduce a special tax up to 3.5% on secondary homes primarily used for personal purposes. The Confederation grants the cantons two years to adapt the legislation, with a deadline of December 2028. The Executive has accepted the request of the Conference of Directors of Cantonal Finance, led by Christian Vitta from Ticino, to postpone the entry into force to 2029:

"The deadline is essential to harmonize the tax systems without penalizing municipal budgets."

Compensations and Deductions

With the abolition, the deductions for ordinary maintenance expenses (e.g. painting, plumbing repairs) for owner-occupied homes will disappear, while they will remain mandatory for rented properties. For mortgage interest:

• Deductibility limited to the percentage of leased surface (e.g. if 30% of a villa in Morbio Inferiore is rented, only 30% of the interest is deductible).

• First-time homebuyers: maximum deduction of CHF 5,000/year for 10 years on mortgage interest (art. 25a LIFD).

• Abolished federal deductions for energy efficiency (e.g. solar panels or boiler replacement), but cantons can maintain them with a ceiling of CHF 15,000 per intervention (in Ticino, Energy Law 2023 art. 12).

Practical Impact in Ticino

Checklist for property owners by 2028:

1. Verify the "primary/secondary" status at the municipal cadastral office (e.g. Lugano: +5% checks in 2027).

2. Review mortgages: interest not deductible for 100% owner-occupied homes.

3. Document maintenance expenses 2024-2028 for last deductions.

Scenario comparison in Mendrisio:

• Case A (primary home, property value tax CHF 24,000/year):

• Today: taxed as income (average rate 22%) = CHF 5,280 tax.

• From 2029: complete savings, but loss of maintenance deduction (e.g. CHF 2,000/year).

• Case B (second home in Riva San Vitale):

• New cantonal tax: 3.5% on cadastral value (min. CHF 1,400/year for properties over CHF 800,000).

The border municipalities like Chiasso plan to hold information sessions in 2027 for foreign property owners, given the 31% of foreign residents in the Ticinese real estate market (USTAT 2023 data).

Operational details

The reform of the property value tax introduced by the Swiss Parliament will have a significant impact on the Ticino real estate market, where the property value tax represents an important voice in the tax system. According to data from the Federal Department of Finance, in 2025, the property value tax generated around CHF 350 million in national revenues. The Cantons will now need to assess the introduction of a special tax on secondary residences, which could affect areas such as Lugano, Ascona, and Locarno, where the presence of secondary residences is high.

Comparison with the current system Currently, the property value tax applies to the theoretical rental value of a property. From 2029, this burden will be eliminated, but new rules for deductions will be introduced. For example, mortgage interest will only be deductible for the portion related to rented properties. For those who have a mortgage on a property, this change could result in an increase in tax pressure. The Cantons will have the option to maintain deductions for energy-saving interventions, but with time limitations. The new regulation provides that properties used for non-residential purposes, such as shops, offices, and industries, will be subject to a reduced property value tax of 50%. This measure could negatively affect property owners, such as those on Via S. Agostino in Lugano, who could suffer a reduction in income. The Ticinese municipalities of Bellinzona, Chiasso, and Lugano will need to adapt to the new fiscal rules and assess the opportunity to introduce a special tax on secondary residences. According to experts, this measure could generate around CHF 20 million in annual revenues for the municipality of Lugano. Here is a checklist of operational steps for Ticinese municipalities: - Assess the opportunity to introduce a special tax on secondary residences - Establish a maximum ceiling for special tax revenues - Define the areas affected by the special tax - Assess the opportunity to maintain deductions for energy-saving interventions - Adapt to the new fiscal rules for non-residential properties

Concrete examples Here are some concrete examples to illustrate the impact of the reform:

• A property owner in Lugano, with a theoretical rental value of CHF 4,000 per month, will pay a property value tax of CHF 1,200 per year. From 2029, this burden will be eliminated.
• A shop owner on Via S. Agostino in Lugano, who owns a shop with a theoretical rental value of CHF 6,000 per month, will pay a reduced property value tax of 50%, i.e. CHF 3,000 per year. From 2029, this burden will be maintained.
• A property owner in Ascona, with a mortgage of CHF 200,000, will only be able to deduct mortgage interest for the portion related to the rented property. If the property is rented for CHF 50,000 per year, they will only be able to deduct CHF 50,000 of mortgage interest.

Useful tools for your case

To verify your within/over 20 km tax scenario, use the net salary calculator and the tax return guide.

Key points

Abolition of the property tax from 2029: what it means for property owners in Ticino

The ongoing fiscal reform in Ticino will bring significant changes for property owners, particularly those planning to buy or manage a second home. Starting from 2029, the property tax will be abolished, but this does not mean that property owners will no longer have to worry about taxes. On the contrary, they will need to check with their municipality to see if there are any special taxes on second homes and plan their fiscal situation carefully.

Special taxes on second homes

The reform does not cancel the municipal tax on properties (ICI), but introduces a new type of tax for second homes. For example, the city of Lugano has already announced the introduction of a special tax on second homes starting from 2029. This tax will be applied to properties that are not used as the primary residence and are registered in the name of individuals or companies that do not have their primary residence in the municipality.

To illustrate this, let's assume that a Swiss citizen owns a second home in Lugano, which is not used as the primary residence. The property is registered in the name of the citizen and has a value of CHF 500,000. The special tax on second homes will be applied at a rate of 1% of the property's value, resulting in an annual tax of CHF 5,000.

Deductions for mortgage interest

The reform limits the deductions for mortgage interest for property owners. Currently, property owners can deduct mortgage interest from their taxable income, but starting from 2029, the deduction will be limited to 50% of the mortgage interest. This means that property owners will have to pay a higher amount of taxes.

To illustrate this, let's assume that a property owner in Bellinzona has a mortgage of CHF 200,000 with an interest rate of 3%. The mortgage interest is CHF 6,000 per year. Currently, the property owner can deduct the mortgage interest from their taxable income, but starting from 2029, the deduction will be limited to CHF 3,000 (50% of the mortgage interest).

Energy-saving interventions

Property owners in Ticino will also need to plan for any energy-saving interventions by 2028 to benefit from the current deductions. The reform limits the deductions for energy-saving interventions starting from 2029.

To illustrate this, let's assume that a property owner in Lugano wants to install a floor heating system. The cost of the intervention is CHF 20,000. Currently, the property owner can deduct the cost of the intervention from their taxable income, but starting from 2029, the deduction will be limited to CHF 10,000.

Concrete actions

To prepare for the fiscal reform, property owners in Ticino need to take some concrete actions:

1. Check with your local municipality about the possible introduction of a special tax on second homes. 2. Plan any energy-saving interventions by 2028 to take advantage of the current deductions. 3. Consult a tax consultant to assess the impact of the reform on your situation.

Operational Checklist

To help homeowners prepare for the tax reform, we have created an operational checklist:

• Check with your local municipality about the possible introduction of a special tax on second homes
• Plan any energy-saving interventions by 2028 to take advantage of the current deductions
• Consult a tax consultant to assess the impact of the reform on your situation
• Calculate the impact of the reform on your specific case using our tax calculator

Comparison of practical scenarios

Here is a comparison of practical scenarios to help homeowners understand the impact of the tax reform:

• Current scenario: homeowner of a house in Lugano with a mortgage of 200,000 francs with an interest rate of 3% and annual mortgage interest of 6,000 francs. The property is used as a primary residence.
• Scenario after the reform: homeowner of a house in Lugano with a mortgage of 200,000 francs with an interest rate of 3% and annual mortgage interest of 6,000 francs. The property is not used as a primary residence and is subject to the special tax on second homes.

The comparison between the two scenarios shows how the tax reform can have a significant impact on property management. Homeowners must consider the changes to mortgage interest deductions and the introduction of the special tax on second homes to plan their financial situation.

Source: tvsvizzera.it