Swiss Tax Deductions for Loans Explained

Many people are aware of the fact that homeowners in Switzerland can deduct the interest charged for their mortgages from their taxable income. But much fewer people know that interest paid for personal loans, credit card loans, and loans from private individuals are also tax deductible.

Which interest charges are tax deductible?

You can deduct the interest you pay for loans from your taxable income by declaring it in your tax returns. This tax deduction applies to the following loans, among others:

• Loans from private individuals: If you borrowed money from a private person (a friend or acquaintance, for example) and paid interest on the loan, you can deduct the interest you paid from your taxable income.
• Personal loans: You can deduct the interest you paid for personal loans from banks and other lending institutions. Swiss lenders send you a statement at the beginning of the year that you can submit along with your tax returns to prove your claim.
• Credit cards: If you have carried negative balances on your credit card, you can deduct the interest charged from your taxable income. Swiss credit card issuers send you an interest statement showing how much interest you paid. This statement must be submitted with your tax return.
• Mortgages: You can deduct the interest you paid for mortgages from your taxable income. Swiss mortgage lenders provide you with mortgage statements for your tax returns.

Can I also deduct the loan repayments from my taxable income?

No, you can only deduct the interest charges, but not the loan repayments themselves. When you make loan payments, part of your payment is used to amortize your loan, while part of it is used to pay the interest charged by the lender for the loan. You can deduct the part of your payments that covers the interest charges, but not the part used to pay off your loan. Supplemental fees and charges for loans and credit cards are not tax deductible.

Can I deduct leasing payments from my taxable income?

No. Private individuals cannot claim any tax deductions for leasing agreements – including car leasing. Additionally, you cannot claim tax deductions for the decline in the value of leased cars or other items.

Can I deduct the full cost of interest charges?

There is a cap on the tax deduction for interest charges, but it is so high that it is not relevant for most consumers. The maximum tax deduction is 50,000 francs, plus an amount equal to the returns earned on your assets during that tax year. Personal loans and credit cards loans are not large enough to generate interest charges of that size, and even the interest charged for most mortgages will not exceed that limit.

Can I deduct my debts from my taxable wealth?

You can declare your debts in your Swiss tax returns and deduct them from your wealth. If your wealth exceeds the threshold above which wealth tax applies in your canton, subtracting your debts lowers your taxable wealth, and the wealth taxes you have to pay.

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