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Old 23.03.2008, 17:18
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Are rental payments tax deductible?

Quick question, apologies if it's already covered somewhere (happy to be pointed in the right direction)

I'm trying to calculate what my Swiss tax liability might be when I move to Vaud.

I understand that mortgage interest is tax deductible. However, is rent tax deductible?

Thanks

Last edited by dabutiman; 23.03.2008 at 22:02.
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Old 23.03.2008, 18:01
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Re: Rent tax deductible?

What do you mean by rent tax? Like Mwst? VAT?
As far as I am aware you offset the interest of a mortgage against the theoretical renting tax, but I don't remember claiming any money back when I actually rented an apartment. Mind you, I probably filled in the tax form incorrectly.
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Old 23.03.2008, 19:08
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Re: Rent tax deductible?

Don't know the details but I know that when we were renting, our accountant wanted a copy of our apartment lease in order to work out what could be claimed. I know there was something but I don't know how much.

Sorry, I didn't pay attention to detail only to the refund we received
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Old 23.03.2008, 19:51
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Re: Rent tax deductible?

Flat/house rent is partially deductible in Canton Zug. Unaware that it is deductible in Vaud or elsewhere. Please check.

Are you a freelancer or self-employed? Does your employer expect you to work from home? Then you can allocate the fractional rent of 1 room to professional expenses.
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Old 23.03.2008, 22:00
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Re: Rent tax deductible?

Oops. Sorry jbrady. Re-reading my post, I realise that I've garbled the question and it looks as if I'm referring to a "rent tax".

What I'm really asking is whether you can obtain a tax deduction (cantonal, communal or federal) for the rent that you pay on your accommodation. I've edited the title of the post to remove the ambiguity.

It is pretty clear that if you take out a mortgage to buy a house, you can obtain a tax deduction for the interest on the mortgage, but, if instead of buying a house you choose to rent a house, do you get a tax deduction for your rental payments?

I couldn't find anything on this. From what Goldtop and Natsbrit say, maybe it varies by canton. Couldn't find anything for Vaud. But what about at Federal level? Is rent a tax deductible expense at federal level?

Thanks
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Old 23.03.2008, 22:28
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Re: Are rental payments tax deductible?

On my tax return (ZH), my ZH rental accommodation costs were not entered anywhere. This suggests to me that at the federal level there is no offsetting of rental costs on your tax form. It appears from this thread (as you say), though, that there may be differences across cantons for canton tax.

I own and rent out apartments in the UK; the mortgages were offset as debts and the rental income (after expenditure) was treated as income, and equity treated as wealth.
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Old 24.03.2008, 00:10
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Re: Rent tax deductible?

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Oops. Sorry jbrady. Re-reading my post, I realise that I've garbled the question and it looks as if I'm referring to a "rent tax".

What I'm really asking is whether you can obtain a tax deduction (cantonal, communal or federal) for the rent that you pay on your accommodation. I've edited the title of the post to remove the ambiguity.

It is pretty clear that if you take out a mortgage to buy a house, you can obtain a tax deduction for the interest on the mortgage, but, if instead of buying a house you choose to rent a house, do you get a tax deduction for your rental payments?

I couldn't find anything on this. From what Goldtop and Natsbrit say, maybe it varies by canton. Couldn't find anything for Vaud. But what about at Federal level? Is rent a tax deductible expense at federal level?

Thanks
No. Rent is not deductible unless you are working from home or are a low income family.
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Old 24.03.2008, 00:53
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Re: Are rental payments tax deductible?

I would be employed in Vaud and not working from home.

Initially I thought there as a big tax advantage to owning the house as opposed to renting but I guess you have to factor in the outrageous "valeur locative" deemed income that is included in your tax return as a result of owning a house. You don't have to factor this in if you rent.

Thanks for the replies.
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Old 24.03.2008, 08:28
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Re: Are rental payments tax deductible?

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I would be employed in Vaud and not working from home.

Initially I thought there as a big tax advantage to owning the house as opposed to renting but I guess you have to factor in the outrageous "valeur locative" deemed income that is included in your tax return as a result of owning a house. You don't have to factor this in if you rent.

Thanks for the replies.
This is correct. However you should also factor in the low mortgage rates. 65% of the value of the property can be in the form of a non-amortised mortgage (ie you never pay the capital back, just the interest) with the current variable rate of 3.5%.

So CHF500,000 will cost you CHF1458 a month....
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Old 24.03.2008, 11:02
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Re: Are rental payments tax deductible?

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This is correct. However you should also factor in the low mortgage rates. 65% of the value of the property can be in the form of a non-amortised mortgage (ie you never pay the capital back, just the interest) with the current variable rate of 3.5%.

So CHF500,000 will cost you CHF1458 a month....
Thanks AbFab.

But would that mean that I wouldn't own the property outright at the end of the mortgage period? If I want to own the property then I would also need to pay off the capital. (Unless this is like the UK interest-only mortgages where part of your monthly payment is invested in mutual funds or something in anticipation of capital growth) - which raises the question: Do you get a tax deduction only for the mortgage interest or for the amortisation of the capital as well? I think the answer is only for the mortgage interest - that's all that I could see on the tax forms. I used the Vaudtax software provided by the Vaud tax authorities (talk about spending hours thumbing through my French dictionary! ) and all it asked me about was mortgage interest, not amortisation.

Thanks
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Old 24.03.2008, 12:02
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Re: Are rental payments tax deductible?

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Thanks AbFab.

But would that mean that I wouldn't own the property outright at the end of the mortgage period? If I want to own the property then I would also need to pay off the capital. (Unless this is like the UK interest-only mortgages where part of your monthly payment is invested in mutual funds or something in anticipation of capital growth) - which raises the question: Do you get a tax deduction only for the mortgage interest or for the amortisation of the capital as well? I think the answer is only for the mortgage interest - that's all that I could see on the tax forms. I used the Vaudtax software provided by the Vaud tax authorities (talk about spending hours thumbing through my French dictionary! ) and all it asked me about was mortgage interest, not amortisation.

Thanks
Capital amortization is not tax-deductible.
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Old 24.03.2008, 18:07
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Re: Are rental payments tax deductible?

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Thanks AbFab.

But would that mean that I wouldn't own the property outright at the end of the mortgage period? If I want to own the property then I would also need to pay off the capital. Thanks
There is no mortgage period. It's an interest only mortgage with an unlimited term. You own the property, you don't pay off the debt, the debt is secured against the property. If you want to amortize the debt you can have a term mortgage if you wish.
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Old 24.03.2008, 19:49
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Re: Are rental payments tax deductible?

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There is no mortgage period. It's an interest only mortgage with an unlimited term. You own the property, you don't pay off the debt, the debt is secured against the property. If you want to amortize the debt you can have a term mortgage if you wish.
Thanks Nev. So that means that, using an interest only mortgage, at some point I would be looking to sell the property to pay off the mortgage. Cheaper than a term mortgage but you've got to find the capital if you want to keep the house.
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Old 24.03.2008, 20:05
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Re: Are rental payments tax deductible?

You never need to find the Capital - you can pass the debt onto your children. Just keep paying the interest.
The Japanese system is similar.
A long time in the future, the capital is miniscule compared with the value of the property.
For example the woman who sold us our house borrowed 40K 25 years ago - this was about 80 percent.
She kept this going until she moved into an old folks home and her kids got 450K for the house minus the 40K and estate agents fees.
Just a matter of time and luck.
I think you just worry about how much you pay per month and treat it like cheap rent for a nice property instaed of speculating - just a house at the end of the day.
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Old 24.03.2008, 20:42
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Re: Are rental payments tax deductible?

The advice tha rent on the whole cannot be offset against tax is correct. You might be able to get away with one room as an "office" but be prepared to prove that....

The interest on a mortgage can be offset against tax but then you have the counter that you pay tax on a theoretical rentable value.

Often places with low tax rates have higher property costs and rent costs.
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Old 24.03.2008, 20:49
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Re: Are rental payments tax deductible?

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I understand that mortgage interest is tax deductible. However, is rent tax deductible?

Thanks
No - as unfair as this is. People living in Basel Landschaft used to be able to make a (small) deduction but that was declared unconstitutional a couple of years ago.

If you work from home or if you need to prepare for work from home (like teachers do) you could deduct something for the room you need to work in. You have to prove that, though. They called us several times until they believed my wife that she spends a large amount of time preparing in her office (she's a teacher).
Apart from that, there's nothing you can deduct.

peter
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Old 25.03.2008, 10:49
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Re: Are rental payments tax deductible?

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Thanks Nev. So that means that, using an interest only mortgage, at some point I would be looking to sell the property to pay off the mortgage. Cheaper than a term mortgage but you've got to find the capital if you want to keep the house.
You've got to distinguish the concept of ownership and mortgage. If you buy the house you're the outright owner whether you have a mortgage or not. If you have a mortgage you can keep the house provided you keep up with repayments. As others have pointed out if you have an interest only mortgage you only have to pay interest. If you want to discharge the mortgage then yes you have to find the capital which is usually achieved by selling the house.
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