It’s often said that Switzerland is a tax haven. But when you consider the myriad tax authorities that exist – the Confederation, the 26 cantons and over 2,000 municipalities – Switzerland seems more like a tax nightmare. In this article, we hope to iron out your concerns and show how and where you can make savings.
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What can I deduct from my taxes? Seven tips for tax savings!
Many people worry about their annual tax return. They start to feel anxious as soon as that tax letter drops through the mailbox in the spring. They ask themselves questions like: What can I deduct from my taxes? How much can I deduct? And what conditions must be met? We answer your most pressing questions with our seven tips on saving money on tax.
Tip 1: Deduct insurances from tax
Just like taxes, insurance premiums are also a bit of a headache. But in some cases, they’re tax-deductible.
The rule of thumb is that if the insurance is for retirement planning, it can be deducted from income tax. This includes the following insurance types:
- health and care insurance
- retirement provision
- OASI and pension fund contributions
- liability insurance
- accident insurance
- disability insurance
- insurance for professional activities and education (legal protection insurance, professional liability, service liability insurance)
There is an upper limit of CHF 1,700 for insurance premiums in the case of direct federal tax. This is higher for married couples and registered partnerships – CHF 3,500.
Tip 2: Get educated and save!
Since the start of 2016, deducting further education costs has been permitted. But it’s important that this further education is not initial training and goes beyond the level of secondary II (e.g. apprenticeship, academic baccalaureate etc.). The following further education costs can be deducted:
- course and examination costs
- course material costs
- travel costs to attend the course (journey, accommodation and meals)
At federal tax level, the maximum amount of deductions for further education is CHF 12,000. However, the cantons set the exact amount at their level so the maximum amount varies between the different cantons.
Tip 3: Travel to work by public transport or bicycle? Then it’s deductible!
Looking after the environment reaps rewards! You can deduct up to CHF 3,000 from federal tax for journeys from home to work as long as you travel by public transport, bicycle or moped. Motoring costs are more complicated – they can be deducted in exceptional cases if the distance between work and home is too great. Also, if your home is more than around a kilometre away from the nearest public transport stop, or if you save more than around an hour by using the car, you can deduct motoring costs from tax. The exact times and distances are set at canton level.
Tip 4: Classic tax savings with pillar 3a
Deducting payments to the third pillar is the classic form of tax deduction. But there are things to bear in mind here too. Payments to pillar 3a can be deducted from taxes, but not payments to pillar 3b.
Did you also know that in the case of pillar 3a, investments can be made not only in retirement savings accounts but also in retirement funds? Find out the differences, advantages and disadvantages in our article “The link will open in a new window How to get more from your retirement planning”.
As pillar 3a has an annual inpayment limit of CHF 7,056 (as of 2023), this is the upper limit for deductibility. Please note: if you’re not part of a pension fund because you are self-employed, you can pay in up to CHF 35,280 (as of 2023) or a maximum of 20% of your net income.
Tip 5: Fill the pension gaps and save on tax
It’s not only column 3a that can offer tax savings; pension funds can also provide tax benefits. Payments to the 2nd pillar that exceed the normal inpayments from employers can be deducted from tax. However, as far as payments (or what are known as “purchases”) into the pension fund are concerned, you must not have reached the maximum possible amount for retirement assets, which can be found on your pension fund statement. This means you must provide evidence of a contribution gap. These contribution gaps arise when an income situation changes, e.g. through a salary increase, a long training period, parental breaks, divorce, a change of job or a lengthy period abroad.
Tip 6: Make optimal use of child tax deductions
Do you have children who are minors, unable to work or at the initial stage of education? Then you can make a tax deduction of CHF 6,500 per child, as long as they live in the same household and you are primarily responsible for their support. So from a tax perspective at least, it is not worth your child in initial education earning more than CHF 18,000 a year.
It’s also worth noting that the deadline for child tax deductions is 31 December of the calendar year. So if your child is born on 31 December, you can make the tax deduction. If your child ceases to meet the requirements before 31 December (e.g. completes initial education before 31 December), you can no longer deduct the CHF 6,500 from your taxes.
Tip 7: Philanthropic tax savings
Confederation and cantons accept deductions of donations to charitable organizations. These donations not only include donations of money but also those in the form of securities, real estate, art or jewellery. At a Confederation level, a maximum of 20% of net income can be deducted from tax and there is a minimum donation of CHF 100. Although most cantons have adopted this regulation, check which conditions apply to you on your canton’s website.