Capital gains when selling a house? This tax must be paid.
If you sell real estate or a site at a profit, you must pay a real estate gains tax. Its amount is regulated in the tax law of the respective canton. Find out why the period of ownership also determines how much tax you must pay when selling a house.
Here's how the real estate gains tax is calculated
A real estate gains tax must always be paid when a site or real estate is sold at a profit, i.e. if the sale price is more than the price for which it was originally purchased. Taxes are collected on the difference when the house is sold. According to this principle, most people would have to pay taxes if they sold their home because in recent years, real estate has consistently grown in value. If a home was purchased 20 years ago, there is a high probability that it can be sold for much more today.
However, most people are not taxed on all of the gains, since investment costs can be deducted from the sale price. Besides the original purchase price, these also include value-enhancing investments like expenses from renovating or expanding a house. Costs of transfer of ownership, such as brokerage fees, advertisement costs, legal fees, or the real estate transfer tax can also be deducted. It is important to be able to account for all the expenses.
The real estate gains tax is regulated by each canton
The real estate gains tax is collected by the municipality and/or the canton. The amount differs by location because each canton can stipulate how high the applicable tax rate should be. Many places have a progressive scheme for real estate gains tax as they do for income tax. In other words, the larger the profit, the higher the tax rate, i.e. the percentage that must be paid when you sell the house.
At the same time, many cantons provide relief to long-term real estate owners when selling a house. If you own a site or house for many years, you will pay much less in taxes when selling than sellers who divest real estate just a few years after the purchase. For example, in the canton of Zurich, the real estate gains tax is cut in half if a house changes ownership after 20 or more years. Conversely, almost all cantons charge additional tax on real estate gains after a short period of ownership. This means speculators are asked to pay more than owners of owner-occupied properties.
The real estate gains tax by region
Let's assume a house was purchased for CHF 700,000 and is now being sold for CHF 1 million. The value-enhancing measures in the example total CHF 50,000. This results in a net profit of CHF 250,000. Here's how high the real estate gains tax is in select cities:
|Year 5||Year 20|
|Real estate gains tax in Aargau||CHF 75,000||CHF 25,000|
|Real estate gains tax in Bern||CHF 75,535||CHF 47,513|
|Real estate gains tax in Geneva||CHF 75,000||CHF 25,000|
|Real estate gains tax in Lausanne||CHF 45,000||CHF 22,500|
|Real estate gains tax in Lugano||CHF 65,000||CHF 12,500|
|Real estate gains tax in Lucerne||CHF 52,565||CHF 46,257|
|Real estate gains tax in St. Gallen
||CHF 75,476||CHF 69,815|
|Real estate gains tax in Zurich||CHF 84,930||CHF 44,700|
Source: TaxWare, December 2018
Deferring real estate gains tax
Under certain circumstances, the real estate gains tax can be deferred. For example, if a new property is purchased, this is considered a "replacement purchase." However, any profit must be reinvested – in addition to the original purchase price of the property sold. A deferral is essentially possible for the replacement purchase only if the new property is more expensive than the old one. If a single-family dwelling is sold during retirement and a cheaper condominium is purchased instead, the real estate gains tax still has to be paid on the realized real estate gains.
The tax is only deferred with a replacement purchase. It becomes due as soon as the second property is also sold, if no other replacement purchase is made. If there is a change of ownership within the family, e.g. due to a separation, the real estate gains tax can also be deferred. The same applies in the case of an inheritance, a donation, or an advancement. But also in this case deferred does not mean canceled out. If the real estate is sold to a third party later, the real estate gains tax must be paid later. Here, the determining factors are the original purchase price and the overall period of ownership in the family.
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Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.