Income Tax Part III - The Deductions

Regarding income tax, Swiss tax laws recognize a number of expenses and deductions that allow the taxpayer to reduce their tax burden. Generally, a distinction is made between acquisition costs, general deductions, and social deductions.

The income tax levied on the income of natural persons is perhaps the most well-known type of tax. To reduce the tax burden, Swiss tax laws provide for various deductions. The following three types are distinguished:

• ‍Organic deductions: Also known as expenses or acquisition costs, organic deductions include all costs directly incurred for earning income;
• ‍General deductions: General deductions refer to tax reductions that are not directly related to the taxpayer's income. Essentially, these are living expenses; and
• ‍Social deductions: Finally, social deductions depend on the personal and economic circumstances of the taxpayer.

Organic deductions

Acquisition costs are those expenses incurred for the generation of the income in question. They vary depending on whether the taxpayer is engaged in self-employment or dependent employment. While employees can reduce their tax burden through expenses for commuting, meals away from home, or contributions to unions (Art. 26 DBG), self-employed individuals are entitled to deduct depreciation, provisions, replacement acquisitions, or business losses (Art. 27 ff. DBG).

General deductions

Costs that are not directly related to taxable income may qualify as general deductions. The types of allowable general deductions are exhaustively listed in Swiss tax laws, although their amount and requirements may vary. The most important general deductions include private interest on debts, contributions to the old-age and survivors' insurance (AHV) or occupational pension schemes, insurance premiums, as well as costs for illness and accidents, voluntary contributions to charitable organizations or political parties, education and training costs, and expenses for external childcare (Art. 33 DBG).

Social deductions

Social deductions are not tied to the form of expenses but rather to certain personal circumstances of the taxpayer. The federal government and the cantons handle the granting and design of social deductions differently. All tax laws provide for different burdens based on marital status. The federal government and most cantons also recognize child deductions and support deductions. Finally, some cantons provide tax relief for retirees and taxpayers with modest incomes (Art. 35 DBG).

Source: Swiss Tax Conference (SSK): Brief Overview of the Income Tax for Natural Persons (February 2021), p. 4ff.

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