– February 17, 2021

5 tax tips from the practice

Below you will find five tax tips from our lawyers specialized in tax law. Find out what you should pay attention to when preparing your tax return and how you can optimise your taxes.

1. Paying into the third pillar / buying into a pension fund

Employed persons with a pension fund can make tax-deductible payments into pillar 3a up to a maximum amount of currently CHF 6,883.00 (as of 2021) (this also applies to indirect amortisation of a mortgage). For gainfully employed persons who do not belong to an occupational benefit scheme, the tax-deductible contribution amounts to a maximum of 20%, but not more than CHF 34,128.00 (as of 2021). The capital paid into Pillar 3a is not taxed as assets until it is withdrawn. When the pension capital is paid out, you can benefit from reduced taxation. Persons who are not gainfully employed are not entitled to a deduction for contributions to pillar 3a. In addition to payments into the third pillar, voluntary purchases into the pension fund can also be deducted from taxable income, provided there is an individual coverage gap.

2. Planning property maintenance

The costs of maintaining a property can be deducted from taxable income as long as the investment maintains the value of the property and does not increase its value. The timing of property maintenance can play a decisive role from a tax perspective. Particularly in the case of major renovations, it can be worthwhile to spread the planned work over several years, which can “break” the tax progression several times. Furthermore, a taxable income in the negative range should be avoided by deducting high maintenance costs, as such a loss cannot be carried over to the following tax year. Finally, it is important to weigh up each year whether the actual maintenance costs or the lump-sum deduction have a more advantageous effect from a tax point of view.

3. Declare health costs whenever possible

The self-borne costs of illness and accidents for medical treatment etc. can be deducted from taxable income if they exceed a certain threshold. In most cantons, this threshold is 5% of net income (deductible). Disability-related costs can be deducted without a deductible. Certain groups of persons (recipients of a helplessness allowance, deaf persons, kidney patients with dialysis) can optionally claim a lump-sum deduction. In the case of stays in old people’s and nursing homes, the illness- or disability-related costs are charged according to the intensity of care, whereby the basic fees are in principle included in the non-deductible living costs.

4. Pay attention to the modality of alimonies

Alimony payments to a divorced or separated spouse and minor children are only tax deductible for the person paying them if they are paid in the form of a pension. If the alimony owed is paid as a lump sum instead, there is no deduction. Child alimony (incl. child/education allowances) can only be deducted until the child reaches the age of majority. 

5. Be careful in the case of commercial activity

Anyone who trades in real estate or securities with a certain intensity runs the risk that their activity will be qualified by the tax authorities as commercial real estate or securities trading. In the case of professional activity (qualification as a professional securities trader or real estate trader), the profits generated from trading are not tax-exempt but taxable as income from self-employment and are subject to AHV contributions. In practice, there is also a risk that trading in cryptocurrencies (bitcoins, etc.) and other goods (wine, stamps, works of art, etc.) may be considered as a business activity. The distinction between private asset management and self-employment is assessed on the basis of various criteria, whereby the specific circumstances of the individual case are always decisive.