What can I deduct from the capital gains tax on real estate?

The basis: purchase price and incidental purchase costs

The first step in optimizing your capital gains tax is to look back. The purchase price you originally paid for the house is, of course, part of the acquisition costs. But that's not all.

To optimize your capital gains tax on the property , you can also add the incidental purchase costs incurred at the time of purchase. These include :

• Notary fees .
• Land registry fees .
• Property transfer taxes (if applicable ).
• Real estate agent commissions at the time (if you paid them).

Those who have kept these old documents have created the ideal basis for optimizing their capital gains tax . If these documents are missing, some cantons accept flat rates, but proof is always the safer way to optimize capital gains tax .

Value-enhancing vs. value-preserving investments

greatest leverage lies if you want to optimize your capital gains tax on real estate – but also the biggest pitfall. The tax office differs strict between Preservation ( maintenance ) and increase in value .

• Maintaining the property's value: Painting the facade or replacing the refrigerator. You can deduct these costs from your income tax , but they won't help you optimize your capital gains tax .
• Value-enhancing improvements: Adding a conservatory, converting the attic, or installing a solar panel system. These costs permanently raise the standard of the house. They are key if you want to optimize your capital gains tax .

A classic example: You replace an old kitchen costing 20,000 francs with a luxury kitchen costing 50,000 francs. To optimize your capital gains tax , you can't claim the full 50,000 francs, but only the added value (approximately 30,000 francs). The difference is considered maintenance. Clearly separating these costs is essential to optimize your capital gains tax without running into problems with the tax authorities.

Sales costs: real estate agent and advertisements

It's not just past investments that count. The costs directly incurred through the current sale also help you optimize your capital gains tax .

The largest expense is often the real estate agent's commission. Most cantons allow you to deduct the "customary" commission (usually 2–3% of the sale price). So, if you pay 30,000 francs in commission, this directly reduces your taxable profit. Anyone wanting to optimize their capital gains tax should ensure that the commission is clearly stated in the contract.

Additionally, you can deduct expenses for listings on Homegate or ImmoScout24, costs for professional photos, or the creation of a sales dossier. Every franc you invest in marketing ultimately helps you optimize your capital gains tax .

The prepayment penalty (penalty)

An often overlooked aspect of optimizing capital gains tax on real estate concerns your mortgage. If you need to terminate your fixed-rate mortgage early, the bank will charge a prepayment penalty. This can quickly amount to between 10,000 and 50,000 Swiss francs.

The good news: In many cantons (e.g., Zurich), this penalty payment is considered an investment expense. You can deduct it from your profit and thus optimize your capital gains tax . However, the practice varies from canton to canton (the federal government sometimes handles it differently for direct federal tax, but here we are referring to cantonal capital gains tax). Check with your local tax office to see if you can use the penalty to optimize your capital gains tax .

Special features: Construction loan interest rates and equity contributions

Did you build your house yourself or extensively renovate it? Then you can often also deduct the construction loan interest during the construction phase to optimize the capital gains tax .

Things get more complicated with work you do yourself. Did you convert the attic yourself? To optimize your capital gains tax on this work, you must have declared it as income. "Undeclared work" on your own home is not accepted. Only those who officially declare their work can later use it to optimize their capital gains tax .

Flat-rate deduction for long holding period

What do you do if you've owned a house for 40 years but no longer have any receipts? Has your dream of optimizing your capital gains tax been shattered? Not necessarily.

Many cantons offer the option of a flat-rate deduction instead of deducting actual costs for very long holding periods (e.g., over 20 or 30 years). In the canton of Bern, for example, you can choose whether to provide proof of the actual costs or accept a flat rate (e.g., 10–20% of the property value) to optimize your capital gains tax . Calculate both options! Often, the tedious search for old receipts is a better way to optimize your capital gains tax than simply accepting the flat rate.

Strategy: Documentation is everything

The strategy for optimizing capital gains tax on real estate doesn't begin with the sale, but on the day of purchase. Create a folder ("House CV ").

Collect in it :

• Purchase agreements and notary fees .
• Invoices from tradespeople (only those that increase value!).
• Permits for renovations .
• Receipts for connection fees (sewerage, electricity).

No deduction without documentation. The tax office doesn't believe anything that isn't in writing. Those who diligently collect receipts will later find it easy to optimize their capital gains tax on real estate .

Conclusion

The question "What can I deduct?" is the key to greater net worth. To optimize your capital gains tax on real estate , you need to make the most of the "acquisition costs" category. This includes the original purchase price including closing costs, all value-enhancing investments made in recent years, the real estate agent's commission, and often also the prepayment penalty charged by the bank.

Never confuse maintenance (income tax) with capital gains tax (property tax). Those who strategically separate these and collect complete documentation can optimize their property gains tax and significantly reduce their tax burden.

If you need support in compiling your tax-relevant documents or would like a simulation of your tax burden, Loft offers efficient digital tools for this purpose.

Glossary

• Investment costs: The sum of all expenses for the acquisition and increase in value of the property. They form the basis for optimizing capital gains tax on real estate .
• Value-enhancing investments: Construction measures that permanently increase the value of the property (e.g., extensions ) . full deductible in the case of corporate income tax .
• Prepayment penalty: A penalty charged by the bank for early repayment of a mortgage. In many cantons, this is an important item for optimizing capital gains tax on real estate .
• Real estate agent commission: The fee paid to the real estate agent. As a sales expense, it is tax-deductible and helps to optimize capital gains tax on the property .
• Holding period deduction: A tax reduction based on the holding period. Besides other deductions, this is the most important factor in optimizing capital gains tax on real estate .