Tax deduction by buying into the Swiss pension fund

As with Pillar 3a, pension fund purchases can be fully deducted from taxable income. In addition to precautionary considerations, a pension fund purchase therefore often has the goal of breaking the tax progression on income. Purchases should be planned in the long term and tailored to the individual tax situation. The correct procedure can significantly optimize tax savings. You can find the purchasing potential on your pension fund card or you can find out directly from your pension fund.

Stagger shopping into the pension fund

Tax savings through payments into the pension fund are about optimally breaking the tax progression. If you can spread the effect over several years, the tax savings increase accordingly. This is a consequence of the progressive tax system in Switzerland. Buy yourself into the pension fund in a year in which you make no or less other tax deductions than usual (e.g. property maintenance etc.) or in years with a particularly high income. Analyze your personal progression curve and determine how high a pension fund purchase should be, so that the effect is not watered down too much.

Tax savings by staggering the payments from pillar 3a and the pension fund

The payment of pension capital from pillar 3a and the pension fund is subject to a so-called capital payment tax, which, like income tax, is subject to a progression. In the vast majority of cases, the tax savings from staggering pillar 3a and pension fund payments are considerable. It is possible to open several pillar 3a accounts / custody accounts in order to draw them at a later date in different tax periods and separately from the pension fund capital. Pension capital (2nd pillar and pillar 3a) that are paid out in the same years are counted together. Accounts or deposits in pillar 3a can only be drawn in full. In a few cantons, there are exceptions to the payment of pension capital.

Pay off mortgage indirectly

With indirect amortization, the amount of the mortgage always remains the same. The repayment is made via a pillar 3a account pledged to the bank, to which the repayments are paid. In this way, you benefit on the one hand from the high deduction options for mortgage interest and on the other hand from the deduction options by paying into the pillar 3a account. This saving option is particularly advantageous for taxpayers who do not make voluntary payments to the Pillar 3a account!

Worldwide assets / worldwide income

There is a basic obligation to declare worldwide assets and income earned worldwide, because at least to determine the respective tax rate, these factors are also required in Switzerland.

In practice, it can always be found that e.g. houses and condominiums located abroad are not specified in the Swiss tax return. In most cases, this is probably due to ignorance of the corresponding declaration obligation or due to incorrect information.

The same applies to foreign custody accounts and the interest and dividends earned from them. In such cases, depending on the double taxation agreement, the taxation right (if DBA is in place) often lies with the country of residence, which is often Switzerland for taxpayers with unlimited taxation in Switzerland. This is despite the fact that in many cases foreign withholding taxes have already been withheld before the dividends are paid in the foreign country.

In order to avoid double taxation, the crediting procedures in the country of residence and the reimbursement procedures in the foreign countries (source countries) must be observed.

Real estate: maintenance of residential property

The maintenance costs for condominiums or single-family houses quickly exceed the flat-rate deduction. Many tax-deductible costs are not always familiar to even investment officers. For example, the fees for water meters, the costs for heating service subscriptions or the effort involved in preparing heating bills. The authority then often deletes the entire deduction and only allows the flat-rate deduction. You can appeal against this.

You can find the deductible maintenance costs for properties in the Canton of Zurich at: To the Cantonal Tax Office in Zurich

Reduction in rental value for underuse

When the children have moved out, space becomes free. Even after the death of a partner or after a divorce. The rental value can now be reduced proportionally by the unused room, a room with more than 30 square meters is even considered to be two rooms. Side rooms, bathroom and kitchen are considered two rooms in single-family houses and one room in condominiums. However, such free spaces may no longer be used.