There are always questions surrounding the topic of real estate. How can properties be given away/inherited in a way that is as tax-neutral as possible? Which real estate maintenance costs are tax deductible? Can costs for renovations be spread over several years?
The following blog is dedicated to these topics...
Gifts
In principle, there are several ways of passing on real estate to descendants during one's lifetime. A distinction can be made between the following forms:
Gift:
Gifts are donations from one person to another, whereby assets are transferred from the donor to the other without expecting anything in return.
Mixed gift:
This usually involves a sale below market price, where the difference to the market value is understood as a gift.
Advance inheritance:
The advance inheritance can be compared to a gift and is treated in the same way under the Swiss tax law. The advance inheritance is also offset against the inheritance if there are several persons with claims to a compulsory portion.
Gift and inheritance tax
In most cantons, spouses, registered partners and descendants (children & grandchildren) are exempt from gift and inheritance tax. Usually, gifts and inheritances to parents, siblings, cohabiting partners and other persons are subject to tax. Which exemption amounts apply must be checked in each individual case.
Real estate maintenance cost
In the case of real estate maintenance costs, the tax law basically distinguishes between value-adding investments, value-maintaining costs, living expenses/ consumption costs and operating costs. The following examples can be used to distinguish between the terms.
Value-adding investments:
These are investments for something that did not exist before or a replacement that is not equivalent. If a pool is newly installed, the costs are not deductible as real estate maintenance costs.
Value-maintaining costs:
Deductible are costs to replace something in order to maintain the value of the property. This includes, for example, replacing the flooring with an equivalent material.
Living expenses/ consumption costs:
Typically, these costs are not tax deductible. These include expenses for telephone, internet or electricity, gas, water, sweeping, etc.
Operating costs:
These costs arise from the ownership of a property and are economically and/ or legally linked to it. These include insurance premiums, contributions to the repair and renewal fund, contributions to road maintenance, etc. These costs can also be deducted as real estate maintenance costs.
Real estate gains tax vs. income tax
Investments that increase the value of a property may not be declared in the income tax return. However, these costs may in turn reduce the taxable profit, which is subject to real estate gains tax.
For income tax purposes, it is essentially value-maintaining costs and operating costs that are relevant and can be declared as tax deductible.
Note
Value-adding and value-maintaining costs are not always clearly separated. An investment may be of both types and the costs incurred may be taken into account proportionately in the respective tax returns.
Tax treatment of environmental protection and energy saving measures
As a rule, investments relating to environmental protection and energy-saving measures are fully deductible as real estate maintenance costs. These include the replacement of windows, the installation of a new heating system, costs for facade insulation, etc. Now, dismantling and deconstruction work can also be claimed as a tax deduction. However, it must be carefully checked to what extent these relate to the replacement construction of the property and should be shown accordingly on the invoice.
Major expenses may be spread over 2-3 consecutive tax periods and don't need to be artificially spread over several years, provided they exceed the taxable income of the year in which they were incurred.
E-charging stations
Although the investment is an energy saving measure, it is still not tax deductible. The reason for this is that the primary benefit concerns the vehicle and not the property.
