Tax Incentives and Mortgage Amortization

The Swiss parliament currently discusses two policy initiatives with effects on tax incentives for
wealth accumulation. Initiative 17.400 proposes to reform the taxation of imputed rents and the
associated tax-deductibility of mortgage interest payments. Initiative 20.494, or the related motion
19.3702, proposes to allow for additional tax-deductible voluntary contributions into pillar 3a of
the pension scheme. Our research shows that these two debates are tightly related: households do
not fully amortize their mortgage also because contributing to the tax-incentivized pension fund is
more beneficial than reducing mortgage debt. The tax deductibility of mortgage interest payments
and pension contributions thus need to be discussed jointly.