Imputed rental value in the canton of St. Gallen -- do I really have to pay tax on this?

You live in your own home -- and still end up paying more?

You saved for years, bought a property, and are enjoying your home. Then the tax return arrives. Suddenly, you have to pay tax on income you never actually received. That is the imputed rental value. And yes, it frustrates many people.

But do not worry: if you know the rules of the game, you can significantly reduce the burden.

What exactly is the imputed rental value?

The imputed rental value is a fictitious income. It corresponds to the amount you could charge as rent if you were to let your house. You must declare this amount as income -- even though not a single franc flows into your account.

The rationale: the federal government wants to treat tenants and homeowners equally for tax purposes. Tenants cannot deduct their rent. Homeowners, in return, have the imputed rental value as income but may deduct interest and maintenance.

How is the imputed rental value calculated in the canton of St. Gallen?

The St. Gallen tax office calculates the imputed rental value based on the official assessment. It typically amounts to 60 to 70% of the market rent. Four factors play a role:

• Location and municipality of the property
• Size and finishing standard
• Year of construction and condition
• Comparable rents in the area

What can I deduct from the imputed rental value?

In return, you can claim quite a few things:

• Mortgage interest -- Fully deductible.
• Maintenance costs -- Value-preserving investments or a flat-rate deduction.
• Insurance premiums -- Building insurance.
• Management costs -- For rented properties.

Flat-rate deduction or actual costs -- which is better?

You can choose anew each year. In the canton of St. Gallen, the following applies:

• Flat-rate deduction: 20% of the imputed rental value for buildings under 10 years old. 10% for older buildings.
• Actual costs: All maintenance costs actually incurred, with receipts.

The rule of thumb: in quiet years, take the flat rate. In years with major repairs, actual costs are more worthwhile.

Can I have the imputed rental value reviewed?

Yes. The imputed rental value in the canton of St. Gallen is reviewed periodically. In case of significant changes such as a conversion or renovation, a reassessment may take place.

Conversely, you can also request a review yourself. If you believe the imputed rental value is set too high, write to the cantonal tax office SG.

Will the imputed rental value be abolished?

This has been debated for years. The federal parliament has passed resolutions providing for its abolition for owner-occupied property. But note: in return, the deductions for mortgage interest and maintenance would also be eliminated.

Implementation is still pending. For now, continue planning with the existing system.

How can I optimize my tax burden?

Four proven strategies:

1. Stagger renovations -- Spread major work over several years. This allows you to use the deductions every year.
2. Flat rate or actual -- Calculate both options every year. Choose the more favorable one.
3. Review your mortgage strategy -- A higher mortgage means more interest deductions. Whether this pays off depends on the interest rate environment.
4. Request a reassessment -- If the imputed rental value is too high, request a correction from the tax office SG.

Conclusion

The imputed rental value is annoying, but with the right strategy, it is perfectly manageable. Also read our articles on all tax deductions for property owners and subsidies for energy-efficient renovations. At Rüttimann Vision, we prepare your tax return and make sure you are optimally positioned.