Whether you file your own tax returns or have tax at source deducted from your salary, there is a chance that you are paying more income tax than necessary. More than 100 possible tax deductions are available in Switzerland, with some being broadly applicable while others only apply to a very limited number of situations. In Switzerland, taxes are levied on federal, cantonal and municipal levels. Cantonal deductions vary based on your place of residence, while federal tax deductions are identical countrywide. Having an independent, qualified tax advisor review your situation and advise you on which deductions to claim can pay off in long-term savings.
A good place to start, however, is understanding the most important tax deductions which apply – at least in part – to most adult residents for federal tax purposes. Here, moneyland.ch lists 10 tax deductions which every taxpayer should know about:
1. Insurance premiums. Health insurance is compulsory in Switzerland, so the tax deduction for insurance premiums applies to all residents. For reasons unknown, this deduction is lumped together with a deduction for interest on savings. The combined federal tax deduction for insurance premiums and interest earned on money held in savings accounts is currently limited to 1700 Swiss francs per adult (3500 francs per legal couple). This limit does not come anywhere near accommodating the premiums of a 300-franc deductible health insurance policy – as the moneyland.ch health insurance comparison shows – but it covers a fair portion of the cost of the cheapest managed care policy with a 2500-franc deductible. That leaves no room for savings interest deductions or other insurance deductions (car insurance or life insurance, for example), but is still a significant deduction available to all.
2. Commuting. Unless you work from home or are close enough to your workplace to walk, you probably spend money on commuting to work and back. Swiss tax laws favor commuters who use public transportation. If you get to work and back by bus, train, boat, cable car, or other common carrier, you can deduct up to 3000 francs of transportation expenses from your taxable income. If you commute by car or motorcycle, you can still claim a deduction, but only if you meet certain criteria. Criteria vary between cantons, but you will typically be excused for commuting by car if your home or your workplace is located far from a public transportation connection (1 kilometer or more, for example) or if commuting by car is significantly less time-consuming than commuting by public transportation.
3. Eating out. If going home for lunch break is not an option because you work far from where you live, you can deduct the cost of eating out from your taxable income. This deduction is applied at a flat rate of 3200 francs per year for federal tax purposes (1600 francs if your employer provides you with discounted meals). Cantonal tax deductions for eating out vary.
4. Donations. Have you donated money to a charitable cause in the past year? Donations to registered charities can be deducted from taxable income. Each canton has its own list of charities which are eligible for tax-deductible donations, and its own limits on tax deductions.
5. Work-related expenses. Being employed often brings with it considerable added costs, including the cost of special clothing, vehicles, equipment and reference materials. A flat-rate deduction applies to cost which are directly related to your career. Special limits apply to vehicles. For example, the federal tax deduction for privately-owned cars used for work is 70 centimes per kilometer driven in the workplace. The deduction for bicycles and motorcycles is limited to a maximum of 700 francs per year. Other costs directly related to work can be deducted from taxable income up to a maximum of 4000 francs per year (for federal tax purposes). Cantonal and municipal deductions vary between cantons.
6. Interest payments. If you have debt and pay interest on your debt, you can deduct the interest payments you make from your taxable income. This applies to interest paid for personal loans, mortgages and many other types of debt – but not to leasing costs. You can find more information on this deduction in the moneyland.ch guide to tax deduction for personal loan interest charges and the guide to inderect vs. direct amortization of mortgages.
7. Working couples. If you have a spouse or legal partner and both of your work, you can claim a deduction of up to 13,400 francs for federal tax purposes. Cantonal and municipal limits on this deduction vary between municipalities.
8. Dependents. Do you have children or other dependents (a dependent sibling, for example) for whom you provide? A flat-rate deduction of 6500 francs per child applies to federal tax. Many cantonal tax deductions are more generous than that.
9. Retirement savings. If you tuck away money in a 3a savings account or policy to supplement your social security and pension fund retirement savings, make sure to claim the 3a tax deduction. The limit on the amount of money you can save using a 3a account changes occasionally, but the current limit is 6'768 francs for employees and 33,840 francs for self-employed individuals. You can find more information in the guide to maximum 3a contributions. If you made additional payments to your 2a occupational pension fund (to make up the difference between your previous and current salary, for example), you can deduct these voluntary contributions from your taxable income.
10. Childcare. If you are a working parent, you are probably well aware of the relatively high cost of childcare in Switzerland. Fortunately parents can find some financial relief in the tax deduction for childcare costs. If you cannot take care of your child yourself because you are working or studying, fees charged by a third-party (a daycare center, for example) for childcare can be deducted from taxable income. The maximum deduction for federal tax purposes is 10,100 francs. Municipal and cantonal tax deductions vary.
In addition to these key tax deductions, there are dozens more which may or may not apply to your financial situation. Taking time to carefully review all possible tax deductions will help you avoid paying more taxes than necessary, freeing up money for other expenses and investments.
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