There are a number of tax deductions in Switzerland that can greatly lower the amount of tax you must pay. If you are a person who purchases expensive items, you should be aware that there are different tax deductions for that as well. There are many different ways that you could benefit from tax deductions in Switzerland.
Switzerland is a great place to live and have a marvelous time. It is known for its mountains, lakes and the beautiful views they have. In addition to this, it is also known as the land of tax deductions. If you are living in Switzerland, you may want to know about tax deductions in Switzerland.
The Swiss banking system is based on the private banking system. It allows tax deductions for the majority of Swiss taxpayers. But it also presents great opportunities that are yet unknown. The Swiss Banking system is built up by a large number of tax deductions. The most important is the taxation of interest income on savings in order to reduce the taxable income.
(Disclosure: some of the links below may be affiliate links). We all want to pay less tax! When completing your Swiss tax return, it is important that you take advantage of all possible tax deductions. Tax deductions allow you to reduce your taxable income. Since your taxable income directly affects the amount of tax you have to pay, it is important to reduce it as much as possible. Therefore, in this article I want to discuss all possible tax deductions that exist in Switzerland. With any luck, you can find tax deductions you haven’t taken advantage of before and lower your taxes. I will try to take a general approach because many of these tax deductions vary from subdistrict to subdistrict. The maximum and minimum amounts for each tax deduction are likely to change significantly. In addition, the deductions may be different at the federal and cantonal levels, since the maximum deductions are different in each case.
One tax deduction that almost everyone can claim is for the cost of driving to work. If you have to pay something to go to work, you can deduct that cost from your income. First: If you drive to work, you can deduct the miles you drive between your home and your workplace. If you work full time, you can deduct up to 220 times the cost of a round trip to and from work. You also need to justify the use of the vehicle, but that’s usually not difficult. In my case, for example, there is hardly any public transportation where I live. If you use public transport to get to work, you can also deduct the cost of a season ticket for public transport. Finally, you can also deduct a fixed amount for bicycle travel if you bike to work. It is interesting to note that most cantons allow a deduction for public transport and cycling if you use both. Each canton has its own maximum amount for this deduction. However, this is an important deduction, as it can easily amount to several thousand Swiss francs, which are excluded from your taxable income.
If you can’t go home for lunch, you can also deduct the cost of meals. In some cases, you can also deduct the cost of dinner if you can’t even make it home for dinner, but you have to justify it. You can deduct a total of 15 Swiss francs for each meal eaten away from home. If you use a discounted canteen or if your employer pays for your meals, you can only deduct CHF 7.50 per meal. Again, there is a cap on this deduction at the federal and cantonal levels. However, this is an important deduction as it can be significant (especially if your business does not have a cafeteria for benefits).
Night at work
If your work requires you to spend a night away from home, you can deduct the cost of accommodation at your workplace. You can also deduct the cost of traveling to and from work twice a week. In that case, don’t forget to declare the two meals a day for tax purposes!
You can also deduct other work-related expenses. For example:
- Hardware and software
In general, you can claim a tax deduction of 3% of your net income. However, the maximum amount is CHF 4000 per year. If you have higher costs, you can also deduct the actual costs with all the necessary justifications. If you have to drive your own car to work, you are also entitled to a tax deduction based on the number of miles you drive.
If you are taking a major course to further your professional career, you may also be able to claim a tax deduction. If you are taking a retraining course to change jobs, this can also be deducted here. You must justify these costs and bear them yourself. You can’t deduct it if your company pays for it, which is usually the case. In some cantons, you can deduct part of the tuition without having to justify it. This is the case in Zurich, but there are probably other cantons that allow this.
Right now, when we have to work from home, it’s really confusing. Each canton has established different rules for home office tax deductions. If you have to work from home, you can benefit from the same deductions in most cantons as before. But in general, if you work from home, there are some things you can drop:
- You can deduct the cost of equipment you use to work from home if your employer does not provide it.
- You can deduct the cost of renting the room if you use it exclusively as a home office.
During the COVID-19 period, if you continue to use the same office deduction as before, you cannot claim the home office deduction. You have to decide. The rules are expected to change after the COVID 19 situation.
Third party contributions for support
The best tax deduction would probably be a contribution to the third pillar. You can pay up to CHF 6,883 per year for each working person in your household. So if there are two people working in your household, you should contribute to both if you can. This 6883 CHF per year is deducted from your taxable income. This has a very large impact on your taxable income. As a self-employed person, you can deposit up to 20% of your net income into the third pillar, up to a maximum of CHF 34,128. Now you just have to invest in a good third pillar. And you should invest your third pillar money in the stock market as much as possible. Otherwise the efficiency will be very low. If you don’t have a third pillar yet, discover the best third pillar in Switzerland. If you invest in a good third pillar, it’s almost free money. Most other tax deductions allow you to deduct the money you spend. But with this tax deduction, you can deduct the money you invest, which is much better!
Second supporting contribution
You can also get a tax deduction for the money you voluntarily contribute to the second component. If you make an additional contribution to the second component, this contribution is tax deductible. The amount you can contribute depends on the contributions you made before the second component. You can contact the supplier of the second part to find out how much you can pay. This can be a very large amount (sometimes over CHF 100,000). This technique allows you to take advantage of important tax deductions. However, this is only interesting if you have access to a good second pillar with a good return. Unfortunately, this is not the case for most people. For example, the average return is less than 1%, which in my case is very miserable. You should also make sure that you qualify for a tax deduction. If you withdrew money from a second component to buy a house or a start-up, your additional contributions will not be taxed until you pay back what you withdrew. This is the main reason why we do not invest in our second pillar. If you want to know more, you can find out whether or not you should contribute to the second pillar. Like third-pillar contributions, second-pillar contributions are almost free money! The problem with the second component is that the return is quite low for most people.
Payment of debts
If you have debt and are paying interest, you may qualify for a tax deduction. For example, if you have a consumer loan or a mortgage, you can deduct all interest payments. The same goes for credit card debt, of which few people are aware. On the other hand, you cannot claim interest on the lease because you do not own the asset (probably the car) at the time of the lease. This is why a car loan can sometimes be more interesting than a lease. Also, don’t forget to deduct the value of your debts from your taxable net worth. This could have a significant effect on property taxes.
If you make a donation to a charity, you can deduct the amount of the donation from your taxes. Many charities in Switzerland are recognized by the IRS and you can donate to them to reduce your taxes. You must keep receipts from the charity for your tax return. The advantage of this trigger is that the limit is very high. At the federal level, a deduction of up to 20% of your net income is available. At cantonal level, this will be between 10% and 20%.
Another good tax deduction is the deduction of insurance premiums. Since health insurance is mandatory in Switzerland, you are already paying for it. So it’s good that you can deduct some money from your taxable income. You can deduct contributions for health and accident insurance. The maximum amount is CHF 1,700 for single persons and CHF 3,500 for couples. The problem is that this amount is much lower than what we actually pay. But it’s better than nothing!
If you have high medical expenses, you can deduct some of them from your taxable income. These medical expenses include:
- Prescription drugs
- Glasses and lenses
- Prescribed care
If you have to pay for it out of pocket (no supplemental insurance or a high deductible or both), you can deduct it from your taxes. However, in most cantons, you can only deduct expenses that exceed at least 5% of your net income. If your expenses are less than this minimum, you can’t deduct anything. This means that in the vast majority of cases, you cannot deduct anything.
Childcare in Switzerland is incredibly expensive. Fortunately, you can deduct the cost of childcare from your taxable income. If your child is under 14 and you need to pay a caregiver, you can deduct this amount. A tax deduction is possible for childcare or crèches). The maximum tax deduction at the federal level is CHF 10,100, but varies greatly from canton to canton. This is an important deduction to keep in mind, as it will have a significant impact on your taxable income.
If you are a married couple, there are two possible tax deductions:
- If your spouse does not work, you can deduct 2,600 CHF from your taxable income.
- If your spouse works, you can take advantage of a tax deduction for two. This corresponds to 50% of the lower of the two incomes, with a minimum income of CHF 8,100 and a maximum income of CHF 13,400.
If you have dependent children or disabled persons, you can claim up to CHF 6,500 per dependent person. At the cantonal level, this number varies greatly depending on where you live. If you are divorced and paying alimony to your ex-spouse, you can deduct it from your taxable income. In some cases, you can also deduct gifts made to the person who needs the money to live.
Asset management fees
You can deduct a royalty for holding your capital assets:
- Registration fee
- Cost for safe
- charges for savings accounts
- Negative interest charges
In most cantons, you can deduct either an actual fee or a lump sum. The single rate is usually calculated per thousand units of your net worth. In most cases, the fixed price is higher than the actual cost, so it is better and easier to deduct the fixed price.
If you carry out repairs in your home (painting, repairs to the kitchen, heating, etc.), you can benefit from tax deductions. Whether or not they can be deducted depends on the nature of the work:
- If the repairs improve the energy efficiency of your home, you can deduct them from your taxable income. For example, if you replace windows to improve insulation or if you opt for a heat pump.
- If the repairs increase the value of the home, you cannot deduct them from your taxable income. For example, if you want to build a veranda on your house.
- Other repairs that do not increase the value of the home may be deducted.
If you are planning a big job, it may be worth spreading it out over several years if possible. Since taxes are progressive, you can save more money in two years than in one. But that only interests the big spenders.
You can also deduct other housing expenses from your taxable income. However, very few of these are tax deductible and you will need to check with your subdistrict to see what you can deduct. For example, the premium for building insurance, which you can deduct in most cantons. They will add these costs to the cost of home repairs. You can choose between a flat rate or an effective tax deduction. If you do not have a repair order, you should opt for a flat rate, which will likely be higher.
Decrease in rental value of your property
If you own your home and live in it, you pay tax on the notional income – the rental value of your home. You pay taxes as if you were renting it out. This will increase your taxable income. This can significantly increase your taxes. There is only one way to reduce the rental value of this property: pretend to sublet. This is possible if you have a room in your house that is not being used. You can indicate that you are not using this room and request that it be removed from the rent calculation. This can have a significant impact on the rental value and therefore the taxable income.
Report of the deducted tax
Finally, if you have paid tax at source, do not forget to declare it. These deductions will be offset against the taxes you have already paid. In this way, they actually reduce the taxes you have to pay anyway. You pay tax at source on the following income
- Annuities and pensions
- Lottery winnings
As you can see, there are many opportunities for tax deductions from your taxable income. However, there is no magic deduction you can make. For example, some tax deductions are practically free. B. third and second stage contributions. However, for many deductions, you can only deduct what you have already paid. So overall, there’s not much you can do to get a bigger tax deduction. Bottom line: Don’t forget thetax deduction! You have to make sure you deduct everything you’re allowed to deduct. Swiss taxes may be reasonable, but they will be the biggest item on your budget if you have a high income. It is therefore important to do everything possible to minimise them. If you need more information, you can read my guide on Swiss taxes or my article on marginal tax rates. Do you know of any other tax deductions we could use? Get our best strategies and tips delivered straight to your inbox. Get free advice on your finances to help you become financially independent!One of the most important deductions in the Swiss tax law is the deduction of alimony, paternity and child support. This reduces taxable income and thus reduces tax. To be able to deduct alimony and child support payments from income, you must be in a sole custody. However, if you have a partner, you must ask the court to grant you the right to deduct your share of alimony and child support from your income in order to deduct these payments properly.. Read more about switzerland tax calculator and let us know what you think.
Frequently Asked Questions
What can I deduct from my taxes Switzerland?
As a citizen of a country that usually has a single income tax rate for the majority of taxpayers, you may be wondering how your taxes are determined and which deductions you can claim. There are many ways to calculate your taxes, the most important thing is to start by listing all your expenses and then deducing the taxable income from that. You will find many pages of information on the internet that will tell you how to lower your taxes by locating the right deductions and how to claim them correctly. While all these pages are valuable, you still need to look at the situation and at the current tax rate in order to get the correct deductions for your situation.
What tax will I pay in 2021?
The United States continues to be a heavy tax burden for the average American household. There are many tax deductions and incentives available to the average taxpayer that can reduce their tax liability. Below are a few tax deductions that you may be able to take advantage of in your next tax return. The United States announced that it will extend the existing tax cuts before the next Presidential election. So, what’s the effect on you? If you are on the U.S. payroll, the new tax cuts are good news. In fact, the new tax cuts are expected to increase your pay by an average of $1,000 a year. If you’re not on the U.S. payroll, the new tax cuts are bad news. In this instance, you will pay more tax because you are more likely to be a higher bracket taxpayer.
How much tax do you have to pay in Switzerland?
When you pay income tax in Switzerland, it can seem to be a complicated procedure. Most people are not accustomed to the fact that tax deductions are a key part of the tax system in Switzerland, and that you can only claim them if you have a tax deduction income. That being said, the following example should help you to work out your personal tax for the year 2018, and to realise that you can also lower the amount of taxes you pay in the future. The Swiss government has released a new Swiss tax guide, which contains important information about the taxation of various incomes in the country. Some points of interest in the new guide include the fact that the new flat tax system is non-refundable, and the lucrative income protection scheme is paid for by employers.
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