Switzerland taxes you on rent you never receive. If you own your home and live in it, the tax authorities calculate what you COULD charge a tenant, then tax you on 60-70% of that amount as "income." This is the Eigenmietwert, and it is unique to Switzerland.
The logic: a homeowner benefits from "free housing" (they don't pay rent to themselves). The state treats this benefit as income. In exchange, homeowners can deduct mortgage interest and maintenance costs from their taxable income.
How it works in practice
Anna owns a 4-bedroom house in Bern. Market rent for her property: CHF 36,000/year.
- Eigenmietwert (70% of market rent): CHF 25,200/year added to taxable income
- Her mortgage interest deduction: CHF 18,000/year
- Net additional taxable income: CHF 7,200/year
- Extra tax at 25% marginal rate: CHF 1,800/year
Why homeowners tolerate it
Because mortgage interest deductibility is the flip side. If you carry a large mortgage, your interest deduction can EXCEED the Eigenmietwert, creating a net tax benefit. This is why many Swiss homeowners deliberately maintain high mortgages (indirect amortization via Pillar 3a rather than direct principal repayment). The interest deduction offsets the Eigenmietwert.
Approved reform, later implementation
Swiss voters approved the home-ownership tax-system reform on 28 September 2025 by 57.7%. The Eigenmietwert system still applies in 2026 while detailed implementation rules are prepared; the tax authority expects the abolition to take effect in early 2029. The package also restricts deduction of private mortgage interest and maintenance, with transition details to check. The net effect depends on mortgage size and canton. See the Federal Tax Administration reform page and its September 2026 implementation update.
