Yes, purchasing of your real estate property will also have a fiscal impact on your situation!
When it comes to taxes, there is good and bad news. Let’s start with the good one: the tax value.
What is the tax value?
Every real estate property has a selling price, it is the amount that you will spend divided in two categories: personal investments and mortgage loan of the bank to pay the seller. Your property will thus form part of your assets but interestingly not at its selling price but at its tax value.
And you know what? This is good news! And do you know why? Because it is usually lower than the amount of the price paid.
Put simply, we mean that the tax value corresponds to 70% of the actual price of your real estate property.
What are the results? Easy, your assets will decrease and, thereby, your taxes as well.
And now time for the bad news the rental value.
What is the rental value?
Let’s take my example again… Zoé and I purchased a real estate property at 770,000 CHF with a tax value of 539’000 CHF.
I will be taxed on a rental value. This rental value corresponds to what I could perceive if I rented out my apartment. It is a fictive income.
Here you are thinking: « But you are living there, Noé, in this apartment! You are not renting it out. So why do you have to pay as if you were?”
I… I… Let’s just say that’s the way it is and that’s it.
To make it even more complicated, there is no precise way to calculate what you owe in taxes.
In order to determine the rental value, you first have to determine the fiscal value of your real estate property. Generally, the retained value corresponds to 70% of the price of the property. In our example, the fiscal value is of: 0,7 x 770×000 CHF = 539,000 CHF.
The rental value will be based on this value, it usually corresponds to 5% of the fiscal value : 539,000 CHF x 0,05 = 26,950 CHF.
So, let’s imagine that Zoe’s salary is 96,000 CHF, and mine is 72,000 CHF. After this purchase, we will have to add to our income the rental value. We will no longer pay an income tax on 96’000 + 72’000 but rather on 96’000 + 72’000 + 26’950 CHF.
What are the deductions that home owners can claim?
Now, it is time for the second good news! The mortgage rates paid, as well as the maintenance costs are completely tax deductible. On top of these deductions, you may also be able to count on the depreciation of your debt to make significant savings on taxes.
Last but not least, everything that is connected to the maintenance of your property in order to maintain its value will also reduce your taxable income.
What you should keep in mind: while real estate is a good way to make money, it is first and foremost one of the best ways to save some!
Something tells me that your next question is: when should I buy? The answer is simple: now.