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What you need to know about taxable income

What is the Taxable income used? Is it the same as the rate-determining income? And is this based on the Income net, gross or something else? These questions were asked frequently.

The tax system in Switzerland can be quite complicated, not least because of the many similar-sounding technical terms. As most of the taxes you have to pay are based on your income, you are probably particularly interested in the different income categories.

In this article, you will learn what all falls under taxable income and what the difference is to rate-determining income. Below you will also find a Step-by-step guideso that you can calculate your taxable income yourself.

Table of contents

What is taxable income?

Taxable income is the basis for calculating taxes. This includes all sources of income. In addition to your salary, income from dividend payments or rental income, for example, is also included.

All deductible costs are deducted from this. In addition to contributions for the Social insurances you can also Payments into the 3rd pillar or voluntary purchases into the Pension Fund deduct. In addition, in most cantons you can deduct a tax that varies from canton to canton. Tax-free amount can be claimed. There are big differences, but in most cantons you can deduct between CHF 5,000 and CHF 20,000 as a single person without children.

These amounts may vary depending on additional factors such as home ownership, insurance premiums and special professional expense allowances, as they are included in the regulated differently in the cantons are.

What many people don't realise: Since you are responsible for the Federal tax other deductions than for the State and municipal taxyou have two taxable incomes per tax period.

Taxable income vs. rate-determining income

  1. Taxable incomeTaxable income is the amount on which your taxes are calculated. To do this, you subtract all permitted deductions from your gross income, such as social security contributions, pillar 3a payments or lump-sum deductions. This final amount is usually lower than your gross income, as all deductible costs have already been deducted.
  2. Rate-determining incomeThe rate-determining income determines how high the tax rate (i.e. the percentage you pay in tax) will be. The tax rate often increases the more you earn. In some cases - for example, if you move to Switzerland in the current year or have income from abroad - the rate-determining income may be higher than the taxable income.

Example of differences:

If you moved to Switzerland in July and only earned income here for half a year, the tax office will extrapolate your income as if you had earned it here for the whole year. This means that the tax rate is determined on the basis of your "extrapolated" income, even if you actually have less taxable income.

Similarly, foreign income is often calculated as if it affects your entire annual income, even if only part of it is taxed.

Simply explained in a nutshell:

  • Taxable income = amount on which you pay tax (after deductions).
  • Rate-determining income = Basis for determining your tax rate, which may be higher if, for example, part of your income comes from abroad or was earned during the year.
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How is taxable income calculated?

The taxable or taxable income is calculated by deducting the social deductions from your gross income. This gives you your Net income (some also say Net income to this). Depending on the canton, you can then claim different deductions in your tax return. These include, for example Payments into pillar 3a, donations and a Flat-rate deduction for a tax-free minimum income (tax-free amount or flat-rate deduction).

If you had other income, e.g. from dividends or child allowances, these will be added.

Calculate taxable income: Table with step-by-step instructions

This allows you to calculate your taxable income yourself step by step:

The data for the calculation of your taxable income is based on your Wage statementwhich you receive from your employer every year. If you don't have your salary statement to hand at the moment, you can download your Net wage You can also easily calculate it yourself. To do this, take one of your payslips and multiply the net salary by either 12 or 13 - depending on how often your salary is paid out each year.

You can find out the exact deductions and flat rates that apply in your canton on your canton's website. cantonal tax office to find out more. There you will find all the information on possible individual deductions, such as Flat-rate deductions or Insurance premiumswhich differ from canton to canton.

Tax burden according to taxable income cantons

In this chart you can see the different levels of the total tax burden for a gross income of CHF 70,000.

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Taxable income calculator

Use the following tax calculator from the federal government to calculate the tax burden on your income:

Tax calculator

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Conclusion

The taxable income states, Which part of your income is taxed is paid. This is usually significantly lower than your salary, as you various prints can make. On the one hand, the net salary is used as the basis, so you don't have to pay tax on social deductions.

Of these, you can also pay a further tax, which varies from canton to canton, Flat-rate deduction can be claimed. Certain other expenses, for example for insurance or pensions, are also deductible. However, you must add other income, such as income from your share portfolio.

Overall, taxable income is usually much lower than your actual net salary. Taxable income is also referred to as rate-determining income is used. This indicates in which Income level you are categorised and with which Percentage your income accordingly taxed will.

Incidentally, the municipal tax rate also plays an important role in the calculation of taxes. In our article on the topic Municipal tax ratee you can find out more.

FAQ

As a rule of thumb, you can use the following for income tax in Switzerland about 20-30 % of gross income to plan. The exact amount varies depending on the canton and municipality as well as your income and marital status.

Here are a few simple guidelines:

  • In cantons with low tax rates, such as Zug or Schwyz, the tax burden can be less than 20 %.
  • In cantons such as Geneva or Vaud, the tax burden is higher and can reach up to 35 %.

The more you earn, the higher your tax will be as a percentage (progressive system). However, you can often reduce the tax burden by making deductions such as for pillar 3a or professional expenses.

The Taxable income is the total of all income (e.g. salary, dividends, rental income) less authorised deductions such as social security contributions, pillar 3a and other allowances. It forms the basis for calculating the tax burden.

The Taxable income is the amount on which you have to pay tax. It is calculated from your gross income, minus certain costs, such as contributions to AHV or private pension plans.

To your calculate taxable incomeYou take your net income and make deductions such as pillar 3a, insurance premiums or childcare costs. Additional income such as interest or dividends is also deducted.

Please use the above taxable income table for the calculation.

(Taxable income calculator linked above).

The Taxable income determines how much tax you have to pay. The rate-determining income determines which tax bracket you fall into and which tax rate applies to you.

Your to Taxable income can be found on your salary statement or by a calculation based on your gross income minus all deductible items.

The taxable income in the canton of Zurich is calculated as in other cantons: Income minus deductions such as pillar 3a or professional expenses. However, the tax rate varies depending on the level of income.

2 responses

  1. Rate-determining income defines the tax class. What happens if the rate-determining income is specified as «0»?

    Reply

    1. Would you like to describe the initial situation? Then I'm sure we'll quickly find an answer.

      Reply
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