Top 7 deductions to optimize your tax return
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Taxes are a very significant expense for the majority of people in Switzerland.
For me, it is my second biggest expense after housing.
My goal with this article is not to deflect taxes or replace the knowledge of a trustee.
I just want to make Swiss readers understand the interesting deductions regarding the tax return ☺
Example of a taxpayer (Bernard)
➡️ For this article, I thought it would be interesting to give an example. So, I simulated the taxes of an imaginary person.
I named him Bernard 😊
I‘I simulated Bernard who is:
- Single and living alone
- Lives in Gland (VD)
- Works in Morges (VD) (employee)
- Earns 60,000 CHF net per year (at 100%)
- Has 100,000 CHF in the stock market in a Swiss ETF
- Earns CHF 4,000 per year in dividends (gross) from his Swiss ETF
- Does not telework
To carry out this exercise, I went to VaudTax1 (tax declaration site of the canton of Vaud). I noted:
- Taxpayer identification (Bernard in this example)
- Salary of 60,000 CHF per year
- Swiss ETF with 100,000 CHF of assets
- No deduction
In this situation. Here is how much Bernard will pay in taxes.
▶ 9'844 CHF 😬
But that was before reading the minimalistfrugalist blog. Because Bernard learned to deduce some important deductions 😊
1 – Home-Work Transport
In reality, The kilometers from your home to your workplace are tax-deductible.. Also known as travel expenses.
Note that the number of days to calculate is proportional to your percentage of work (100% = 240 days).
▶ In Bernard's case, it's 25 kilometers for a one-way trip. I noted it by public transport. As a result, we go from 9,844 CHF to 8,979 CHF. That is, 865 CHF saved in a single deduction!
2 – Meals outside the home
If your employer doesn't provide meals, each workday is considered a meal day to be deducted (meals eaten away from home).
🔍 By the way, here's a little tip. If you take your Tupperware with food to eat at work, you save on this deduction twice 😉
On VaudTax, if you are at 100%. Just note 240 days.
▶ In Bernard's case, the tax situation increases to CHF 8,373. Note that with just 2 deductions, this represents a saving of CHF 1,471 in tax deductions 🧐
3 – Professional expenses
On Vaudtax, if you have an employer, professional expenses automatically have a flat rate of CHF 2,000.
This deduction concerns personal expenses related to employment.
For example, work clothes or printer ink for teleworking.
In the event that the taxpayer spends more than CHF 2,000, he can put the value into actual expenses.
In Bernard's case, I forfeited. Therefore, the deduction had already been seized.
4 – Health insurance
In Switzerland, we have immense joy in paying for health insurance (humor).
By indicating the annual amount that the taxpayer paid for his health insurance. The taxpayer is entitled to a tax deduction!
▶ In Bernard's case, I noted CHF 5,100 in annual health insurance. Therefore, the tax liability increases to CHF 7,116.
4 – Account 3a
Account 3a is a personal account that reduces taxes.
In broad terms, the 3a account is a savings account but the money added can only be withdrawn subject to certain deductions.
The principle is simple, you add money to your 3a account during the year. Then, you note on VaudTax the total amount that you put in the year of the tax return.
⚠ There is a maximum amount to add per year. In 2023, it was 7,056 CHF
▶ For Bernard, I simulated the maximum amount allowed in 2023. It's CHF 7,056 in account 3a. As a result, he owes CHF 5,006 in taxes. That is, almost 50% less than a tax return without deductions.
5 – Dividends
If you have received dividends, the Swiss government has almost certainly already deducted part of your dividend through withholding tax.
Here is an example, with a dividend received from the SPI ETF.
In this example, we see that regarding the 9.72 CHF of dividends received, the money is divided into 2:
- 6.32 CHF dividends received in the shareholder's pocket
- 3.40 CHF withholding tax levied by the state
But the good news is that you'll be able to get back a percentage of the government deduction 😉
In this example, it will be possible to recover part of the CHF 3.40 taxed by the state. Simply declare the dividend on VaudTax.
⚠️ Note that the % recovery depends on the country of origin of your stock or ETF.
In my simulation, the Swiss ETF withheld 35% in advance dividend tax. However, after filing the return, the tax was approximately 15%, and the state refunded me approximately 20% of the initial tax.
▶ In Bernard's case, I simply simulated CHF 4,000 received annually in dividends, because I had already declared the CHF 100,000 in the ETF at the beginning of this financial year. As a result, Bernard's taxes went down to CHF 4,785! That is, more than CHF 200 recovered on the taxed dividends!
6 – Training costs
If you have taken a training course that you paid for out of your own pocket. During the year of the tax return. Part of your expenses can be deducted from your taxes.
▶ With Bernard, I simulated a training course at 1,000 CHF. As a result, Bernard's taxes went down to 4,467 CHF! Hey presto, 300 CHF saved on the tax return.
7 – Doctor and dentist fees
You can deduct medical and dental expenses (only if you paid them out of pocket).
For example, if you go to a hospital or dentist urgently.
▶ With Bernard, I simulated that in one year, doctor and dentist expenses amounted to CHF 3,000. As a result, taxes dropped to CHF 4,252! Therefore, CHF 200 less to pay in taxes!
Conclusion
➡️ With Bernard's example, there are about 57% of tax reduction with the 7 deductions I wrote.
- Home-work travel expenses
- Meals outside the home
- Professional expenses
- Savings account 3a
- Taxation of dividends
- Professional development costs
- Medical and dental expenses
In this example, Bernard's tax bill went from CHF 9,844 to CHF 4,252. This was achieved with only 7 deductions.
⚠ However, jI didn't write down all possible deductions! I just wrote down the 7 main deductions for an average citizen.
For example, it is also possible to deduce:
- Expenses related to real estate
- Deductions for expenses related to children's daycare
- Real estate debts
- Redemption of years of occupational pension provision (2nd pillar)
- Work carried out in his main residence
👉 In fact, you should not hesitate to communicate any deductible expense to the tax authorities!
It should also be noted that each tax return is unique.
⚠️ I want to emphasize the importance of providing accurate and precise amounts when filing your tax return❗ In order to avoid tax evasion and hefty fines.
Top 7 deductions to optimize your tax return
FAQ – Swiss tax deductions: how to optimize your tax return?
What are the best tax deductions in Switzerland?
The most commonly used deductions in Switzerland are generally:
- home-to-work travel expenses
- meals away from home
- contributions to account 3a
- health insurance premiums
- professional expenses
- medical and dental expenses
- training costs
These deductions often allow for a significant reduction in taxable income.
How to legally pay less tax in Switzerland?
To legally pay less tax, you mainly need to:
- use all available deductions
- optimize your 3a account
- correctly declare your professional expenses
- declare your eligible medical expenses
- optimize your retirement planning
The goal is not to avoid tax, but to use existing tax rules.
Does account 3a really reduce taxes?
Yes. The 3a account is often considered one of the best tax optimization strategies in Switzerland.
Each amount paid into pillar 3a generally reduces taxable income up to the permitted annual limit.
Can meals eaten at work be deducted?
Yes, in many cases meals away from home are deductible if returning home is not reasonably possible or if the employer does not provide meals.
Are transportation costs tax-deductible?
Yes. Commuting expenses can often be deducted.
The exact rules vary depending on:
- the canton
- the means of transport used
- cantonal ceilings
Can the withholding tax on Swiss dividends be recovered?
Yes. Swiss dividends are often subject to withholding tax of 35%.
Part of it can usually be recovered by correctly declaring one's income and assets in the tax return.
Are medical expenses tax-deductible?
Yes, some medical, dental or treatment expenses paid out of pocket may be deductible.
However, the rules depend on the total amount of expenses and the canton.
Can training be tax-deductible?
Yes. Professional development expenses, certifications or training related to professional activity are often deductible.
Why is optimizing your tax return important?
An optimized declaration allows:
- to legally pay less tax
- to increase its savings rate
- to invest more
- to accelerate its financial objectives
Are tax rules the same throughout Switzerland?
No. Swiss taxation varies depending on:
- the canton
- the municipality
- family situation
- income
- heritage
You should always check the rules applicable to your canton.
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I decided to create this blog to develop and help readers who are looking for a simpler and more economical life.
Compared to before, I was a person who consumed a lot until the day I realized that my consumption made me sadder and poorer 😑
Now I prefer the minimum of my needs to be happy and achieve my financial freedom.
Without realizingI started to focus on saving and investing to depend on a boss for as little time as possible and to speed up my personal projects.
For several years I have felt happy and I have become richer in a way that I would never have imagined given that I have an average salary in Switzerland.
It is for this purpose that I decided to create this blog. In order to share and learn with other people who seek freedom and simplicity 😉
Are you rather minimalist or frugal Jonny?
I am as minimalist as I am frugalist. However, there are situations where I lean more towards an art of life.
To conclude, I think the most important thing is to feel comfortable in your lifestyle 😊
Top 7 deductions to optimize your tax return
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