Tax planning is a crucial part of managing your finances, offering opportunities to reduce your taxable income and improve your financial well-being.
However, many people overlook deductions and credits that could significantly lower their tax burden.
Whether you’re preparing your tax return or looking for ways to optimise your financial strategy, here are some key deductions and credits to consider:
Payments made to Swiss Pillar 1, 2, and 3 pension systems are among the most effective ways to lower your taxable income. Not only do these contributions provide immediate tax relief, but they also help you build a solid foundation for your retirement savings.
Pillar 3a contribution limits change annually, so it is important to stay up to date about the latest thresholds. However, if you are self-employed and not part of a Pillar 2 scheme, you can contribute more to your Pillar 3a, generally up to 20% of your income, with an annual cap that changes each year.
Additionally, for higher-income earners, your employer may offer a Pillar 1e plan, which is a supplementary pension scheme that allows for greater investment flexibility compared to standard Pillar 2 plans.
Employment/Workplace
As an employee, you can deduct various costs related to your job. These can include commuting expenses, work-related meals, and other necessary employment-related costs.
The deduction limits vary significantly by canton. For example, in some cantons, you may deduct up to CHF 3,200 annually for meal expenses incurred during working hours.
Families can benefit from several child-related deductions. These deductions reduce taxable income for each dependent child and may cover daycare, after-school care, and payments to third-party caregivers, as well as maintenance support.
These deductions vary by canton and will typically have capped amounts.
You can often deduct expenses for further education or training.
Expenses for job-related training, tuition, and other forms of professional development may qualify, generally provided that they enhance your current role rather than preparing you for a new career.
Charitable donations to registered organisations are also deductible, allowing you to support causes you care about while reducing your tax liability.
These will often include monetary donations and, in some cases, contributions of goods or services. Be sure to keep all relevant receipts and documentation to claim this deduction accurately. While there are minor differences between cantons, the limits for claiming these deductible contributions are generally based on a percentage of your income.
If you own a property, you can deduct mortgage interest payments and costs for maintenance or renovations from your taxable income.
However, Switzerland applies an imputed rental value (Eigenmietwert/Valeur locative/Valore locativo) to homeowners. This is an estimated income based on what your property could earn if rented out, and it is added to your taxable income.
While these deductions can reduce your tax liability, the added imputed rental value may offset some of the benefits, depending on your overall financial situation.
Healthcare expenses exceeding a certain percentage of your income may also be deducted. Eligibility thresholds vary widely by canton, so reviewing local guidelines is essential.
These deductions may cover out-of-pocket medical expenses, prescription medications, or certain therapies.
Investments in energy-saving home improvements, such as solar panels, insulation, or energy-efficient windows, may qualify for tax deductions, subject to the rules of your canton.
If the costs exceed your taxable income for the year, you can generally carry them forward and deduct them over the following three tax years.
Swiss taxpayers are entitled to a personal allowance, which is influenced by marital status and the number of dependents.
Married couples are taxed jointly, which can significantly impact their tax liability. To ease the burden, many cantons offer specific deductions for married couples, both for dual-income and single-income households, reducing their joint taxable income.
Tax planning is an integral part of your financial health, and understanding available deductions can help you make the most of your income.
Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice.