15 Ways to Save on Taxes in Switzerland

If you do not understand the intricacies of the Swiss tax system, you can pay much more in taxes than you actually owe. These useful tax saving tips from moneyland.ch will help you avoid paying more taxes than you are meant to.  

1. Insurance premiums

The cost of these insurances can be deducted from your taxable income:

• Health insurance
• Accident insurance
• Life insurance

There is a limit on how much you can deduct. If you participate in an occupation pension fund (through your employer), or contribute to the pillar 3a, then the amount you can deduct for insurance is normally smaller. If you do not, then the limit for insurance deductions is higher. The maximum federal income tax deduction for all of these insurances combined is:

• 1800 Swiss francs for a single person who contributes to a pension fund and/or the pillar
• 2700 francs for other singles
• 3600 francs for a married couple which contributes to a pension fund and/or pillar 3a
• 5400 francs for other married couples.

Cantons also limit this deduction. In the canton of Zurich, for example, it is limited to 2600 or 3900 francs for singles, and 5200 or 7800 francs for married couples.

Premiums paid for other insurances cannot be deducted. Examples of insurances which do not have tax-deductible premiums include:

• Car insurance
• Personal liability insurance
• Household insurance
• Travel insurance
• Other kinds of property insurance

2. Accidents and illnesses

You can generally deduct all medical costs for accidents or illness which are not covered by insurance. Out-of-pocket costs towards the deductible and coinsurance of mandatory health insurance can also be deducted. The costs of prescription glasses and contact lenses, licensed homeopaths, and dental work can also be deducted.

In practice, this deduction is difficult to benefit from, because you can only claim it if total medical expenses exceed a certain threshold. If your healthcare spending falls below the threshold, you cannot claim the deduction.

For federal and most cantonal income taxes, healthcare expenses have to equal at least 5 percent of your net income for you to be able to claim the deduction. In Glarus, St. Gallen, and Valais, you can claim the healthcare deduction for cantonal income tax if your expenses exceed 2 percent of your income. In Geneva, the threshold is just half-a-percent of your income. In the canton of Basel-Landschaft, there is no minimum requirement to be able to benefit from the deduction for medical expenses.

3. Continuing education

Spending on continuing education for career development is generally deductible, unlike spending on your initial education. How much you can deduct varies between cantons. Proof (invoices, for example) is required for big expenses. In the canton of Zurich and some other cantons, you can claim a 500-franc flat deduction. Proof of expenses is only required for amounts exceeding this amount.

4. Public transportation and bicycles

The cost of commuting to work and back can be deducted from your taxable income.

• Bicycle: Many cantons have a flat deduction for bicycles (typically 700 francs). Some cantons have limitations: In Glarus, for example, you cannot claim the bicycle deduction if your workplace is less than 10 minutes by foot from your home.
• Public transportation: If you commute to work by train, bus, or tram, you can generally deduct the actual costs of public transportation from your taxable income.
• Car: If you commute by car, you can deduct the costs if certain criteria are met.

In the canton of Zurich, for example, one of these criteria must be met in order for you to deduct the costs of commuting by car:

• The next public transportation terminal is more than one kilometer from your home or workplace.
• Public transportation is not operational ahead of or after your work hours.
• Driving to work by car is at least one hour faster than getting to work by public transportation.
• Your employer requires that you use your private car during work hours, and compensates you for this.
• Illness or frailty prevents you from using public transportation.

Other cantons have similar rules.

It is normally possible to deduct both the cost of public transportation and the flat fee for bicycles. In some cases, claiming both the public transportation and car deductions is allowed. That could be the case if, for example, you use your car to drive to the train station, from where you continue your commute by train.

The commuting deduction is capped at a maximum amount regardless of which form of transportation you use. This limit is 3200 francs for federal income tax. In the canton of Zurich, the cantonal tax limit is 5000 francs.

5. Part-time jobs

Income which you earn from an additional, part-time job has to be taxed in full. The federal government and some cantons let you deduct 20 percent of your side salary towards occupational costs as a flat deduction. The requirement is that the deduction is at least 800 francs for one tax year, which is possible if you earn 4000 francs or more from a part-time employment. The flat deduction is limited to 2400 francs. If you want to deduct more than that, you need to provide documents to prove your expenses.

6. Various occupational expenses

Aside from costs for continuing education and commuting, there are many more work-related costs which are tax-deductible. These include spending on required clothing, workplace meals, and necessary computers and reference books. Depending on the cost in question, you can either claim a flat deduction or deduct the effective costs (proof is required for the latter).

The direct federal tax and the canton of Zurich allow for a 2000-franc tax deduction for lower incomes. Above that threshold, the deduction is 3 percent of your net salary, maximum 4000 francs per year. For costs which exceed that threshold, you can deduct the actual amount, but you must provide proof of these expenses.

7. Pillar 3a

You can deduct money which you pay into the pillar 3a (but not the pillar 3b) from your taxable income. This applies to money paid into pillar 3a retirement account and investment vehicles like pillar 3a retirement funds and asset management solutions. This deduction also includes premiums paid for term life insurance and disability insurance which falls under the pillar 3a. The amount you can deduct is limited to the maximum annual pillar 3a contribution.

From a tax perspective, it can be beneficial to divide your pillar 3a retirement savings between multiple accounts. That way you can minimize the retirement capital withdrawal taxes when you withdraw at retirement. You can find more information about taxes in the pillar 3a here.

It is also important to note that assets in the pillar 3a (retirement account balances, for example) do not have to be declared as taxable wealth for wealth tax purposes. That means you do not pay wealth tax on pillar 3a savings.

8. Pension funds

Voluntary, additional contributions to your occupational pension fund to close existing gaps in your pension benefits are fully tax-deductible. As with the pillar 3a, lump-sum withdrawals from your pension fund are subject to a capital withdrawal tax which is lower than income tax.

9. Children

A tax exemption applies for each of your dependent children. This can be deducted from your taxable income.

Good to know: Even if your children are adults, you can still claim the deduction while they work on their initial education.

The tax exemption for federal income tax is 6600 francs per child. Cantonal tax deductions vary. In the canton of Zurich, for example, you can deduct 9000 francs per child. If parents live separately, share custody, and do not pay child support, then each parent can claim half of this exemption. If a parent pays child support, that parent can deduct the child support payments from their taxable income, while the other parent can claim the tax exemptions for the children.

10. Donations

Donations to tax-exempt charitable organizations can be subtracted from your taxable income. The maximum tax deduction for charitable donations varies between cantons, but is typically limited to 20 percent of your net income. For federal income tax, this deduction can only be used if you donate a minimum of 100 francs in a given tax year. You can find the cantonal requirements on the website of Zewo.

11. Political donations

Donations to political parties and membership fees can be deducted for both federal and cantonal taxes. Which political party you support is irrelevant.

Here too, deductions are limited. The maximum federal income tax deduction is 10,300 francs. Limits on cantonal tax deductions vary. In Zurich, for example, the cantonal tax deduction is limited to 20,000 francs for married couples, and 10,000 francs for singles.

12. Stocks and other securities

Shareholder dividends (from stocks and ETFs, for example) are considered taxable income. Capital gains, on the other hand, are not taxed unless the tax office categorizes you as a professional investor. You can find more information in the guide to taxes on stock market trading in Switzerland.

If you have securities like stocks or ETFs, you can claim a flat deduction, or – if certain conditions are met – you can deduct the actual costs. Expenses which qualify for this deduction include custody fees and fees charged for annual statements needed for tax purposes. You cannot deduct fees for buying and selling securities, or for investment advisory services. You can find more information in the guide to Swiss tax deductions for investors.

13. Pay your taxes early

If you pay your taxes early, you may earn interest on the advance. Interest rates vary between cantons. While rates are currently low, the interest you earn is often higher than what you could earn by keeping your money in a savings account. It is important to compare the interest which your canton pays on tax advances with the current savings account interest rates, as you may be able to earn more interest by keeping your money in a bank.

14. Debts

If you have paid interest on debt over the course of the tax year, you can normally deduct this from your taxable income. This includes interest paid on personal loans, credit cards, and mortgages, among others. The highest amount you can deduct is 50,000 francs plus returns. Amortizing mortgages indirectly can make sense from a tax perspective. You can learn more about indirect amortization here.

Lease payments are not tax-deductible. Some cantons also do not let you deduct interest paid for construction loans.

15. Ask an expert

The Swiss tax system is very complex, as laws governing cantonal taxes vary in a big way. Contacting the relevant tax office when you have questions or consulting a tax advisor can be very helpful. You can find many qualified tax experts on the websites of Expert Suisse and Treuhand Suisse.

More on this topic:
Paying taxes early in Switzerland: Does it make financial sense?
Taxing investment returns in Switzerland: A practical guide
How to use the pillar 3a to lower your taxes