What Is Real Estate Gains Tax?
Real estate gains tax is levied on the sale of private real estate if the sale generates a profit, provided it is not a tax-deferred transaction such as inheritance or a replacement purchase.
In some cantons, only private real estate sales are subject to real estate gains tax, while others tax both private and business-related property sales. In cantons where only private sales are taxed, business-related sales are typically subject to regular income or profit tax instead.
How Is Real Estate Gains Tax Calculated?
Taxable Property Gain
Real estate gains tax is calculated on the taxable real estate gain, which is the difference between the sale proceeds and the investment costs. Investment costs include the purchase price and any value-adding investments made during the ownership period. Additional costs, such as expenses related to purchasing and selling the property, can also be included.
Taxable Property Gain Formula:
Taxable Property Gain = Sale Price – (Purchase Price + Value-Adding Investments + Deductible Costs)
Tax Rate
The tax rate varies by canton and sometimes municipality. It can be progressive or proportional, depending on the canton. In most cantons, the tax increases if the property was owned for a short time before the sale, while longer ownership durations generally reduce the tax rate.
Formula for Property Gains Tax:
Property Gains Tax = Taxable Property Gain × Tax Rate
What Costs Are Deductible for Real Estate Gains Tax?
Value-Adding Investments
Value-adding investments form part of the property’s investment costs and can be deducted from the sale proceeds for tax purposes. These investments include any expenses that permanently increase the property’s value, such as new construction, extensions, renovations, infrastructure improvements, and shoreline protection works.
Value-adding investments differ from value-preserving expenditures, which maintain the property’s current value and usability. Examples of value-preserving expenses include repairs, maintenance, and replacing worn-out installations. These costs are generally deductible for income tax purposes but not for real estate gains tax, with some exceptions.
Public or voluntary contributions to public or private entities, such as for road construction, sidewalks, sewer systems, and water management works, are also deductible. Additionally, value-adding work carried out by the property owner is deductible. This is restricted in some cantons to labor taxed as income.
Some cantons allow for additional deductions, such as costs for infrastructure development or planning fees for construction projects submitted to authorities, provided the project is realized or secured. In specific cases, value-preserving expenses incurred in the initial years of ownership may also be deductible if they were not previously claimed for income tax.
Property Transfer Costs
Property transfer costs include expenses incurred when transferring ownership to another party. These typically cover notary fees associated with property purchase and sale.
Brokerage Commissions
Standard fees for real estate brokerage and marketing, such as broker commissions and advertisement costs, are deductible from real estate gains tax.
Owner Contributions
Certain contributions made by property owners are deductible, including:
- Contributions to municipalities as per legal or municipal regulations (deductible in cantons BE, UR, NW, ZG, BL, AI, SG, GR, TI, JU).
- Costs related to connecting the property to roads and public infrastructure (deductible in ZH, UR, SZ, OW, NW, GL, ZG, FR, SO, BL, SH, AI, SG, GR, AG, TG, TI, VD, VS, JU).
Costs for Legal Documents and Contracts
Some legal and documentation-related costs are deductible in specific cantons:
- Costs for mortgage certificates, property liens, and property appraisals (deductible in ZG, AG, VD).
- Expenses for drafting contracts, such as co-ownership or main sale agreements (deductible in GL, ZG, BL, GR, AG, TI, NE; also recognized in practice in SZ and VD for co-ownership agreements).
Obligations of the Seller to the Buyer
Certain seller obligations agreed upon in the sales contract may be deductible:
- Unpaid services, under specific conditions (deductible in LU, AG; recognized in practice in UR, BL).
- Seller-borne costs stipulated in the sales contract (deductible in JU; recognized in practice in BE, OW, AR).
- Value-adding expenses included in the sale price and mentioned in the official sale deed (deductible in VD).
Taxes, Fees, and Compensation Payments
- Transfer taxes and fees for property liens, easements, or encumbrances (deductible in LU, FR, SO, AG, VD, VS, NE, JU; in GE only if the gain is subject to income tax).
- Notarization costs and official permits (deductible in BS, BL, SG, GR, TG; notarization and land registry fees deductible in SO).
By understanding the deductible costs for real estate gains tax, property owners can better calculate their tax liabilities and potentially save on taxes when selling real estate.
