If you are not familiar with the Swiss tax system, there is a good chance that you will overpay when the tax season closes. Knowing what tax deductions you are eligible for when completing your tax returns can help you avoid spending more than necessary.
1. Insurance premiums
Whether or not you can deduct premiums from your taxable income depends on the type of insurance in question. Maximum deductions vary depending on which canton you reside in and other factors.
These insurance premiums are not tax deductible:
- Car insurance
- Liability insurance
- Household insurance
- Other types of property insurance
These insurance premiums are tax deductible:
2. Accidents and illness
Healthcare expenses which are not covered by health insurance can be deducted from taxable income. Such costs may include out-of-pocket expenses like health insurance deductibles and coinsurance payments, and the cost of medical care which is not covered by insurance. Spending on prescription glasses or contact lenses, treatment by licensed homeopaths and dental care can also be included in this deduction.
However, most cantons and the federal government only deduct the portion of healthcare costs which exceed 5 percent of your net income. The cantons of Schwyz and Glarus use a lower threshold, deducting healthcare spending in excess of 3% of your net income. In St.Gallen and Valais the threshold is 2%. Residents of Basel Land enjoy the full benefit of this deduction because expenses can be deducted in full.
3. Continuing Education
The cost of continuing education for the purpose of career development is deductible. However, this deduction only applies to continuing education for adults and not to primary education. The maximum deduction varies between cantons. You are generally required to provide receipts. The Canton of Zurich allows you to deduct up to 500 Swiss francs without providing receipts.
4. Commuting by public transportation or bicycle
The cost of commuting to work and back can be deducted from your taxable income. While deductions for commuting by car are more restrictive, you can claim a 700 franc flat deduction towards the cost of a bicycle used to commute. You can also deduct the costs of commuting to work via public transportation (on a federal level, up to a maximum deduction of 3000 francs).
5. Part-time employment
All income earned through a part-time job must be taxed. However, both the federal government and some cantons allow a flat deduction equal to 20-percent of your second income towards work-related expenses. The maximum deduction you can claim without receipts is 2400 Swiss francs. Expenses above that amount must be proven by receipts.
6. Various career-related expenses
In addition to the costs of continuing education and commuting, you can also deduct many more work-related expenses from your taxable income. Deductible expenses include work clothing, computers, reference books and meals. Depending on the particular expense in question, you may need to present receipts or simply apply a flat deduction.
7. Third pillar retirement savings
The contributions which you make to your 3a retirement savings are tax-deductible regardless of whether you contribute to a 3a bank account or a 3a retirement fund. The amount you can contribute to 3a savings is limited to an annual maximum. From a tax perspective, opening multiple 3a accounts is a good idea because staggering withdrawals when you near retirement age will help you avoid being bumped into a higher tax bracket. Contributions to 3b retirement savings are not tax deductible.
8. Pension funds
Closing any gaps in your occupational pension fund (2a) by making extra contributions can be worthwhile because contributions to 2a pension funds are fully tax deductible. As with 3a retirement savings, the pension you receive from your 2a pension fund is taxed at a lower rate than regular income. Important: Making voluntary contributions to your pension fund is only recommended if your employer is part of a solid, financially sound pension fund.
You can deduct a flat amount of money from your taxable income for each under-age child. Tax deductions for children vary between cantons. It is worth noting that, even if your dependent children are of-age, you may be able to claim tax deductions for them while they are complete their education.
Charitable donations are tax deductible. Typically, deductions for charitable donations cannot exceed 20 percent of your net income. The portion of total donations which exceeds 20 percent of your net income may be tax-deductible if you can provide receipts. Differences in tax regulations between cantons are listed by Zewo.
11. Political donations
Donations to political parties and contributions for political party membership can be deducted from your taxable income for federal income tax and cantonal income tax purposes. Deductions are identical regardless of the political party in question.
Deductions for political contributions are limited to 10,100 francs on the federal level. Limits on cantonal tax deductions for political party donations vary between cantons.
12. Stocks and other securities
Dividends from shares and ETFs are not tax deductible. However, gains achieved through buying and selling shares are tax deductible as long as you are not categorized as a professional securities dealer. You can find more information in the moneyland.ch guide to trading and taxes.
13. Pay taxes early
Paying your taxes ahead of schedule can be beneficial because money deposited at tax offices earns interest at a higher rate than deposits held in savings accounts. Each cantonal tax office sets their own interest rate. Currently, even the interest rates at cantonal tax offices are low. But it is still worth performing a comparison of interest rates at cantonal tax offices.
In most cases, the interest which you pay for loans is tax deductible. Loan repayments, on the other hand, are not. Interest charges which can be deducted from taxable income include those for personal loans, credit card loans and mortgages.
Interest charged for leases (leasing rates) and construction loans is not tax deductible. The highest possible deduction for interest charges is 50,000 francs plus returns on investment (including imputed rental income). If you are servicing a mortgage, using indirect amortization is often beneficial from a tax perspective.
15. Get help from experts
Switzerland’s federal makeup and the variations in tax laws between cantons makes its tax system very complex. Finding a good tax consultant can be more efficient than trying to find your way through the tax maze on your own. Often a single consultation is all it takes to get an understanding of the tax deductions and regulations which apply to your situation. Lists of qualified tax experts are published by Expert Suisse and Treuhand Suisse.