Property depreciation: what exactly is it?
Property depreciation, also known as depreciation for wear and tear (AfA), is a tax advantage for property owners in Switzerland. It allows you to deduct the loss in value of your property from your income over the years and thus reduce your tax burden.
How amortisation works
With property depreciation, the loss in value of your property over several years is recognised for tax purposes. This is particularly interesting for rented properties, as the depreciation reduces the profit that has to be taxed.
There are two common methods for depreciating a condominium: straight-line and declining balance. Both methods have their advantages and disadvantages.
Linear or degressive: which method is better
Straight-line amortisation
The straight-line method is the most common form of property depreciation. A fixed percentage (usually between 1 % and 2 % per year) of the building's value is depreciated each year. This method ensures even tax savings over the years and is particularly easy to calculate.
Degressive amortisation
The declining balance method allows higher depreciation in the first few years, which then gradually decreases. This method can be particularly advantageous if you want to take advantage of higher tax benefits in the early years of your property investment. Note, however, that not all cantons support this method.
Who can use the amortisation
Only owners of rented properties can benefit from property depreciation. If you use your home yourself, you are not entitled to depreciation. However, rented properties can claim part of the value of the building as an expense each year, which can significantly reduce your tax burden.
Tax advantages of property depreciation
The advantages of property depreciation are obvious: by reducing your taxable income, you save tax every year. The tax savings can be considerable, especially for higher-value properties. The choice of the right method - straight-line or declining balance - depends on your financial goals.
Conclusion: Depreciation and amortisation for owners
Property depreciation is a clever way to reduce your tax burden in the long term. Depending on the method - straight-line or declining balance - you can optimise your property strategy and benefit from considerable tax advantages.
When choosing the amortisation method, remember to think carefully about which one best suits your investment. It is advisable if you are unsure, to consult a tax consultant.
