15 Ways to Save on Taxes in Switzerland

If you do not understand the intricacies of the Swiss tax system, you can end up paying 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 occupational pension fund (through your employer), or contribute to the pillar 3a, then the insurance tax deduction is smaller – both for federal income tax, and for income taxes from most cantons. If you do not contribute to an occupational pension fund or the pillar 3a, then the tax deduction for insurance 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, though the limits are generally higher than those that apply to federal income tax. The tax deduction for insurance costs increases with each child.

Table 1: Maximum tax deduction for insurance premiums by canton

For federal income tax and the income taxes of 24 of the 26 cantons, the tax deduction for insurance premiums is combined with the tax deduction for interest earned on savings, and the limits apply to the total deduction. The canton of Vaud has separate tax deductions for savings interest and insurance premiums. The canton of Fribourg has three separate tax deductions (health and accident insurance; other insurance; savings interest). 
¹ If payments were made into an occupational pension fund and/or the pillar 3a, the maximum deduction with pension fund or pillar 3a applies.
² First figure: Maximum deduction for health and accident insurance. Second figure: Maximum deduction for other insurances.
³ The higher amount applies to young adults who are studying.
⁴ The higher amount applies if the parents have not paid into a pension fund and/or the pillar 3a.

Premiums paid for other kinds of insurance cannot be deducted. Examples of insurances that are not tax-deductible include:

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

2. Accidents and illnesses

You can generally deduct any medical costs for accidents or illnesses that are not covered by insurance. Out-of-pocket costs towards the deductible and coinsurance payments 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, many people cannot benefit from this tax deduction because you can only claim it if your total medical expenses in a tax year 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 five 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 two 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

Personal expenses for continuing education in connection with your career are generally tax deductible (unlike the cost of an initial education).

The maximum deduction for direct federal tax is 12,900 francs. Cantonal tax deductions vary between cantons. In most cantons the maximum deduction falls between 12,000 and 13,000 francs. Residents of Basel-Stadt can deduct up to 18,900 francs. The maximum tax deduction in Ticino is 10,500 francs.

You generally have to provide proof of your spending on continuing education (invoices, for example). In the canton of Zurich and the canton of Schaffhausen, you can claim a 500-franc flat deduction without providing proof of expenses. The canton of St. Gallen has a basic flat tax deduction of 400 francs. In the canton of St. Gallen, you can deduct 50 percent of expenses for necessary purchases of IT equipment for training or further education.

4. Public transportation and bicycles

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

• Bicycle: For direct federal tax and in almost all cantons, you can deduct a lump sum of 700 francs for your bicycle. Basel-Stadt allows a maximum deduction of 800 francs. The cantons of Uri and Geneva are the only cantons that do not allow deductions for your bicycle. 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: For direct federal tax and in many cantons, you can deduct 70 centimes per kilometer, with some cantons offering a reduction in the price per kilometer from typically 10,000 or 15,000 kilometers per year. However, you can only deduct the costs of commuting to work by car under certain circumstances. 

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. Some cantons do not have a maximum deduction.

Table 2: maximum deductions for the cost of commuting to work

5. Part-time jobs

Income that you earn from an additional, part-time job has to be taxed in full. The federal government and most cantons let you deduct 20 percent (a minimum of 800 francs and a maximum of 2400 francs) of your secondary salary as a flat tax deduction towards occupational costs. If you want to deduct more than that, you need to provide documents to prove your expenses.

In the cantons of Schwyz and Basel-Stadt, there is no deduction for secondary employment. The canton of Ticino has a flat tax deduction of 800 francs. The cantons of Appenzell Ausserrhoden, Appenzell Innerrhoden, and Nidwalden, have separate rules for income earned through secondary employment for the state.

6. Other occupational expenses

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

The flat-rate deduction for meals away from home is interesting. You can claim a flat tax deduction of 3200 francs per year if you work full-time, or 15 francs per workday if you work part-time. If your employer contributes to the cost of your meals (via a canteen, lunch checks,  or vouchers, for example), then the deductions are reduced by 50 percent. This rule is identical throughout Switzerland.

Federal income tax and the some cantons (Zurich, Bern, Lucerne, and Vaud, for example) have a 2000-franc tax deduction for smaller incomes. Above that threshold, the deduction is 3 percent of your net salary, maximum 4000 francs per year. You can deduct costs that exceed that limit, but only if you provide proof of the expenses.

In some cantons there are other, sometimes more complex regulations. In the canton of St. Gallen, for example, you can claim a basic tax deduction of 700 francs plus 10 percent of your net salary up to a maximum deduction of 2400 francs.

7. Pillar 3a

You can deduct money that you pay into the pillar 3a (but not the pillar 3b) from your taxable income. This applies to money paid into pillar 3a retirement accounts and pillar 3a investment vehicles like pillar 3a retirement funds and pillar 3a asset management solutions. This deduction also includes premiums paid for term life insurance and disability insurance that 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 pillar 3a tax rules 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 gaps in your pension benefits can be deducted from your taxable income in full. 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. Making voluntary contributions to your occupational pension fund only makes sense if the pension fund is financially sound.

9. Children

You can claim a tax exemption for each of your dependent children. This can be deducted from your taxable income.

Good to know: You can continue to claim this tax deduction even after your children become adults, as long as they continue to study for 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.

Federal income tax, as well as the income taxes of some cantons, also have tax credits for children. These tax credits are applied to your taxes and reduce your tax bill by a certain amount per child. The tax administration applies this credit automatically. You do not need to apply for them in your tax declaration.

Table 3: Tax exemptions for children

Table 3 shows the general exemptions for minor children and of-age children who are still completing their initial education, as well as tax credits. In some cantons, the exemption for of-age children completing their initial education is only granted if the taxpayer bears the majority of the child's expenses. Table 3 does not show the tax deductions for children who do not live with you. Some cantons have additional tax deductions that apply in certain situations.
¹ Depending on the child's age.
² The higher deduction applies from the third child onwards.
³ Per underage child.
⁴ Cantonal taxes.

10. Donations

Donations to tax-exempt charitable organizations can be deducted from your taxable income. For federal income tax most cantonal income taxes, the tax deduction for charitable donations is limited to a maximum amount equal to 20 percent of your net income. In the cantons of Jura and Neuchâtel, the maximum tax deduction for donations is an amount equal to 10 percent and five percent of your income respectively. The canton of Basel-Landschaft, on the other hand, does not limit the tax deduction for donations.

For federal income tax and most cantonal income taxes, you can only claim the tax deduction for donations if you donated a minimum of 100 francs during the tax year in question. In the canton of St. Gallen there is a deductible of 100 francs. You can find the cantonal requirements on the Zewo website.

11. Political donations

Donations and membership fees to political parties can be deducted from your taxable income for both federal and cantonal income taxes. Which political party you donate to is irrelevant.

Here too, the tax deductions are limited. The maximum federal income tax deduction is 10,400 francs. Limits on cantonal tax deductions vary. The canton of Fribourg has the lowest maximum tax deduction for political donations and membership fees, at 5000 francs. The highest maximum deductions are found in the canton of Valais (20,790 francs) and, for married couples, in the canton of St. Gallen (21,100 francs).

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 loans over the course of the tax year, you can normally deduct the interest paid from your taxable income. This includes interest paid for personal loans, credit cards, and mortgages, among others. The highest amount you can deduct is 50,000 francs, plus yields. Using indirect amortization for mortgages 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 advisors 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