Switzerland is one of the very few countries that taxes the implicit benefit of owning your home. The tax authority calculates an imputed rental value, typically 60–70% of the open-market rent for an equivalent property in the same area, and adds it to your federal and cantonal taxable income.
In return, owners may deduct mortgage interest, property maintenance and value-preserving renovations from taxable income. This makes high mortgages and high deductions a deliberate Swiss tax strategy — paying down the mortgage shrinks the deductions and increases taxable income.
After years of political debate, parliament approved an abolition of the Eigenmietwert in 2024 (Systemwechsel). Once the cantons confirm via referendum, mortgage interest deductions on primary residences will also disappear. Until then the current rules apply.
A Swiss couple with a paid-down CHF 1.2 million apartment in Bern has an Eigenmietwert of CHF 18,000 per year. Even after deducting CHF 4,000 maintenance, that adds CHF 14,000 to taxable income — about CHF 4,000 in extra tax at a 30% marginal rate.