Canton of Zurich to Forego Increase in Imputed Rental Value – Property Valuation Adjustment to Remain in Place

In October 2024, we reported on the revised directive for the valuation of real estate in the Canton of Zurich, effective from the 2026 tax period. In addition to a significant increase in taxable property values, this new directive originally included a planned increase in the imputed rental value. However, the Zurich Department of Finance has now announced that it will temporarily forgo this increase – at least until the planned abolition of the imputed rental value as part of the federal tax reform.

Background: New Valuation Directive from 2026

With the new valuation directive, the taxable property values in the Canton of Zurich will be adjusted to reflect rising market prices starting in 2026. The taxable values of single-family homes and condominiums are expected to increase by an average of approximately 48 to 49 percent. The aim is to ensure more realistic valuations and compliance with federal minimum requirements.

Originally, the imputed rental values were also to be increased to bring them closer to actual market rents. An average increase of around 10 percent had been planned.

Zurich Department of Finance Halts Planned Increase

On 28 September 2025, the Zurich Department of Finance announced that it will not implement the planned increase in imputed rental values starting with the 2026 tax period and has submitted the corresponding resolution to the cantonal government for approval. The reason is the upcoming systemic change at the federal level: The Swiss electorate has approved the abolition of the imputed rental value as part of the reform of owner-occupied property taxation.

Until this reform is actually implemented, the existing system will continue to apply in the Canton of Zurich. Specifically, this means:

• Existing properties will continue to be assessed under the old 2009 directive. However, the adjustment of taxable property values will take effect starting with the 2026 tax period.
  
• New constructions from 2026 onwards will be assessed under the new directive, with a compensation in the form of an appropriate deduction.

With this decision, the Department of Finance is responding to legal uncertainties during the transition phase and is providing property owners with a degree of stability for the time being.

Impact on Property Owners from 2026

For many taxpayers in the Canton of Zurich, the decision represents temporary relief. The planned increase in imputed rental values would have directly affected taxable income and therefore income tax. By foregoing the increase, this burden remains unchanged.

In contrast, the adjustment in property values affects only wealth tax. While this does result in higher taxable values, wealth tax generally carries less weight compared to income tax. As a result, the financial impact on most property owners is expected to be moderate.

Nevertheless, it is advisable to carefully review the new property values once they are published. If the assessed value significantly exceeds the actual market value, an objection can be filed after receiving the assessment.

Outlook and Recommendations

For property owners in the Canton of Zurich, the current system will largely remain in place for the coming years: The imputed rental value will continue to be assessed based on the existing values, while property values will be adjusted starting in 2026.

Further developments depend on when the federal government enacts the legal basis for the abolition of the imputed rental value. Until then, the Zurich Department of Finance’s decision provides a certain degree of continuity.

Nevertheless, Zurich homeowners should monitor developments closely and adjust their tax planning accordingly. In particular, issues related to financing (e.g. interest structure of mortgages) or major maintenance work should be reviewed early to take full advantage of tax benefits while the current system remains in effect.

The decision to forgo the increase in imputed rental value gives property owners in the Canton of Zurich time to assess their tax situation and respond appropriately to the upcoming changes.