Everyone wants to keep their tax bill down, but many find the subject of tax deductions overwhelming. In fact, it's not that difficult. Check out these 13 simple but must-know tips.
The most significant factor for the calculation of tax is the net income of the taxpayer. There are also various deductions that can be made in the tax return (or tax declaration). These reduce the amount of taxable income and therefore the amount of tax to be paid.
Although deductions for the direct federal tax are the same throughout Switzerland, deductions at the cantonal and municipality levels are regulated differently. As a rule, cantons and communities base their deductions on those of the federal tax. As with tax rates, there are large differences in the allowed amounts of deductions. Precise information on deductible amounts can be found in the "Wegleitung zur Steuererklärung" (Instructions for filing a tax return) from the canton. In general, one must attach the relevant receipts to the tax return when wanting to make a deduction. The tax calculator at comparis.ch shows the municipalities with the lowest taxes in each canton and allows for a comparison among the cantons.
Since each canton has its own tax system, there are differences between them. The information in this article is general – other regulations may apply in individual cantons. Here are the 13 most common deductions for employees.
1. Work related expenses: Employed persons can deduct work-related expenses such as those of commuting to work. As a rule, public transportation passes and flat amounts for bicycles or small motorised bikes are included under commuting expenses. Under certain conditions, the kilometres driven to the workplace can be deducted if you are using a private vehicle.
Other work-related expenses include the costs for meals. As long as you cannot go home for lunch, these expenses can be deducted from income. Deductions are also possible for shift or night work. For further work-related expenses such as costs for work clothing, tools or professional literature there is a flat rate deduction. If the actual costs can be proven to be higher than the flat rate deduction, the tax payer may deduct the actual costs.
2. Alimony payments: Alimony and maintenance payments for children and ex-spouses can be deducted.
3. Payments into pillar 3a: Payments into pillar 3a are tax-deductible up to the maximum allowed amount. For employed persons with an employer pension plan, the maximum contribution for 2015-2017 is 6,768 francs. The self-employed and those without an occupational pension plan may contribute up to 20% of their net earnings up to a maximum of 33,840 francs. You can find out your effective tax savings resulting from paying into a pillar 3a plan using the pillar 3a comparison tool at comparis.ch.
4. Interest on debt: Loan interest payments – for example for mortgages or personal loans – may be deducted from income. This applies only to interest payments and not for principal payments used to pay back a loan (amortisation). Leasing costs cannot be deducted either.
5. Insurance premiums: Premiums for health, accident, life and pension insurance can be deducted up to a certain amount. For the direct federal tax, the maximum deduction allowed is 1,700 francs for single tax payers or 3,500 francs for married tax payers which includes proceeds from bank accounts and savings accounts.
6. Interest on bank accounts and savings accounts: Interest for balances on bank accounts and savings accounts can be deducted up to a certain maximum amount (see also Insurance premiums).
7. Reclaim anticipatory tax: Under certain circumstances only 65 percent of the interests due are credited to a bank account or savings account. In this case the bank transfers 35 percent of the interest to the tax authorities. If the account numbers concerned are listed on the tax return, this anticipatory tax is reimbursed. Anticipatory tax is applied only to accounts for which the amount of interest exceeds 200 francs. In addition to interest from accounts, interest from other sources such as bonds (including medium-term notes), lottery winnings (starting at 50 francs) and dividend payments are subject to anticipatory tax.
8. Contributions to non-profit organisations: Donations to non-profit organisations can be deducted.
9. Paying into a pension fund: Those paying into a pension fund due to a lack of coverage can deduct the corresponding amount.
10. Employment of both spouses: If both spouses are employed, a deduction up to a certain amount is also possible.
11. Expenses for illness and accidents: Certain expenses for medical services not covered by health insurance are tax-deductible.
12. Deductions for children: A deduction can be made for every child who is underage or still in their initial professional training. For the direct federal tax, this deduction is 6,400 francs per child.
13. Pay early and receive interest: In general, one benefits from the early payment of taxes. This is because the tax authorities pay interest for tax payments made early. This interest is generally higher than the currently low interest rates of banks. Those with enough money on the side and who are able to pay their taxes early can benefit.