The 7 most common stumbling blocks in real estate capital gains tax
- Tax knowledge is required to interpret and calculate the property gains tax
- Experience with the local or cantonal peculiarities of tax law
- Zurich
- Aargau
- Bern
- St. Gallen
- Lucerne
- Graubünden
- deductions for costs at the time of sale
- documentation of investment costs
- deadline missed
- extension not submitted
- Tax advice for property gains tax is difficult to find and can be very expensive
Tax knowledge for calculating real estate capital gains tax
The property gains tax was introduced by law at the federal level. However, when calculating it, private individuals are subject to cantonal laws that require appropriate tax knowledge. The calculations are often tied to complex, sometimes multi-level sets of rules and tax rates that must be observed. In some cantons, the local municipality also has an influence on the tax calculation.
Fill out the property gains tax online
Very few cantons have a process for completing the tax return for property gains online. In the canton of Aargau, a paper solution is used, but it is very streamlined. It is recommended to enter variants in a spreadsheet (xls / Excel, or similar) and copy the final result onto the form. It should be noted that paper is also sent in Bern, and there is even a 2-page and a detailed 4-page version, so it is a complicated process and not an easy calculation. In the canton of Zurich, there are forms that are also available as PDFs. There are small differences depending on the municipality (mainly between city and country).
Cantonal peculiarities of the property gains tax
For private individuals, the property gains tax is levied as a special tax in the canton and the municipality when the house or apartment is sold. The tax is therefore due when the profit is realized. The principle follows federal law and is the same in all cantons: the tax should be higher the shorter the period of ownership. It should be noted that taxes can be saved primarily by extending or optimizing the holding period. In addition, the tax can also be progressive, i.e. the higher the absolute profit, the higher the tax rate will be.
Where is the property capital gains tax to be paid?
The property capital gains tax must always be paid where the property for sale is located.
Post from the tax office of other cantons
Accordingly, taxpayers also receive mail from the tax office of the respective canton, city or municipality where the property is located. It should be noted that this is often not the canton of residence, especially in the case of inheritances, investment properties, vacation homes, moving between cantons or abroad.
Canton Zurich
In the canton of Zurich, the property gains tax is normally between 5% and 40%. It should be noted that if the property is held for a very short period, a penalty is applied, which pushes the rate up to 1.5 times the normal maximum rate, i.e. in absolute terms 60% of the total property gain!
The tax rate is progressive, meaning that less tax must be paid for smaller gains over the same holding period. The tax progression reaches 100’000 CHF property profit already has the maximum rate. In practice, this means that for most people, maximum tax rates must be expected as soon as the share of the profit exceeds 100’000 Franconia dominates.
Calculation example for property capital gains tax in the Canton of Zurich:
holding period in years Tax rate at 100’000 Land profit tax rate on 1 million property gain < 1 year 44.1 % 58.4 % < 2 years 36.8 % 48.7 % < 5 years 29.4 % 38.9 % > 5 years 27.9 % 37.0 % > 10 years 23.5 % 31.2 % > 15 years 19.1 % 25.3 % > 20 years 14.7 % 19.5 % Source: tax law Canton ZH, StG 225, own calculations
As you can see, the tax rates are approaching the limits of 20% and 60% for high profits and long and shortest holding periods, respectively.
Regardless of the winning amount, we recommend staggered timing through early planning to optimize taxes. In addition to saving taxes, financing (exiting the mortgage, the usually high prepayment penalty) and the sales order can also be carried out more cheaply.
The property gains tax in the city of Zurich
In principle, the cantonal requirements also apply in the city of Zurich. Due to the high number of changes of ownership in the city, the process in the city of Zurich can take longer and require close cooperation with the tax office. More simple tax tips for Zurich can be found in this article.
The property capital gains tax in the city of Winterthur
The Tax tips for the city of Winterthur can be found here.
city of Uster
The City of Uster refers taxpayers directly to the cantonal electronic form for the property capital gains tax return. This will also be sent in paper form with the assessment.
canton of Aargau
In the canton of Aargau, the property capital gains tax is managed by the tax office in the municipalities. It should be noted that the 4-page property capital gains tax return provides detailed information about deductions and the reduction of the tax rate from 40% to 5% over a holding period of 25 years. The tax rate is proportional.
Canton Bern
In the canton of Bern, the cantonal Tax administration responsible for the property capital gains tax return. It should be noted that a reduction in the tax rate begins from the 5th year of holding and amounts to 2% per year, but a maximum of 70%. If the period is less than 5 years, a surcharge applies (10% - 70%).
Tax rates in the canton of Bern are progressive and the cantonal, municipal and parish taxes are multiplied by an investment factor, which makes the calculation quite complicated.
For example:
A Protestant family sells their city apartment in Bern after their children move out and makes a gross profit of 200’000 Francs after 20 years. The taxable profit is thus reduced by 40% (= 20 x 2%). The investment and tax rate calculation results in a property gains tax due of 36 francs (effective tax rate of 312%).
Source: taxme / sv.be.ch
Save on property capital gains tax: With a correctly completed property gains tax return, additional investment costs and investments in the apartment and tax deductions can be claimed within 20 years. Experience shows that in such situations, profit reductions of 40 - 000 francs can be achieved, which corresponds to a tax saving of around 60 francs. The savings automatically increase with higher profits due to the progression of the tax rate.
Canton of St. Gallen
In the canton of St. Gallen, the property gains tax applies to amounts over 2 francs. It should be noted that it is progressive and increases to a simple tax rate of 200% for profits over 10 francs. The simple tax rate for the property gains tax is to be multiplied by the tax rate, for example 600%.
holding period St. Gallen
For a holding period of less than 5 years, a surcharge of 1% per year is charged, which is very small compared to other cantons. From 15 years, a reduction of 1% - 1.5% applies, with a maximum of 20% - 40.5%, depending on the level of profit.
For owner-occupied properties and those owned for more than 20 years, special provisions apply regarding tax rates and calculation of investment costs.
Canton lucerne
In the canton of Lucerne, there is an allowance of 13 francs. It should be noted that the progressive tax is linked to the income tax rate (“per unit”), and the rate for single people always applies. The maximum tax rate is currently 000%. The tax rate of 5.8 applies equally to all Lucerne municipalities.
holding period Lucerne
For holding periods of less than 6 years, there is a holding period surcharge of 10% per year of shortened holding period. A holding period discount of 1% per year applies from 8 years up to a maximum of 25%.
canton of Grisons
In the canton of Graubünden, the property capital gains tax is between 5% and 15%. Here, too, the holding period determines the amount of the tax. In addition, inflation (depreciation of money) can be offset for investments in real estate or renovations made a long time ago.
Please note that a period of 90 days is granted for the processing and the submission is carried out using special software. For the processing of the property gains tax with softaxspez24 your tax advisor needs the reference number and all documents according to the checklist.
In relation to holiday homes and second home status, the permanent and main residence must be carefully considered when it comes to deferring capital gains tax.
deductions for sales costs
Obvious costs such as advertising a property or sales advice can be deducted as sales expenses in most cantons. It should be noted that notary fees are also incurred when selling. There are also hidden costs, such as early repayment penalties, which can be deducted from the taxable profit.
Calculation of investment costs
These costs, which reduce profits, are also easy to add up in theory. In practice, however, investments are often forgotten, there is uncertainty as to whether they are maintenance costs, or there is no evidence of value-enhancing investments.
Documentation of investment costs according to the guidelines
At this point, it is worth having a discussion with the tax authorities before the assessment in order to achieve the maximum. This can create clarity or find a compromise for investments with room for interpretation. This is often underestimated because every property and every construction project is unique and must be understood as a whole by the tax authorities. If this is only noticed later, it should be noted that an objection must be taken, which rarely leads to success.
Deductions for investments are the most complex stumbling blocks when it comes to property capital gains tax. Depending on the property being sold, files of documents must be reviewed.
assessment of the original purchase price
In the case of old properties, the taxpayer benefits from a long holding period, but the purchase price was often relatively low and the property capital gains tax is correspondingly high.
Most laws provide options for determining the cost of acquisition. It is important to calculate all of these options and choose the cheapest one. Inheritance and legal succession also play a role here.
The assessment of investment costs is also a critical stumbling block when it comes to property capital gains tax.
Don't miss any deadlines
The filing deadline in most cantons is 30 days. It should be noted, however, that in many tax cases it is not possible to meet this deadline because the documentation effort is considerable or documents must be requested from tradesmen or authorities.
Extension of the deadline for real estate capital gains tax
An extension can always be requested for the property gains tax deadline. There is no need to provide a reason for this.
Failure to meet the deadline, submitting an extension too late or requesting a repeated extension may result in further fees, penalties and ultimately an assessment based on the land register facts known to the tax office.
Tax advice for property gains tax is difficult to find and can be very expensive
For private individuals, selling a house or apartment is a major event that often takes place between phases of life or coincides with other personal events.
Since the focus is on real estate sales and the real estate capital gains tax It is important to note that the short-term search for a tax advisor is often difficult and it remains unclear what costs this will entail. Simpletax The prices for the property gains tax declaration are known in advance and the tax advice can also be used by non-existing clients. For existing clients, another advantage is that the declaration of property for regular taxes is already documented.
