Important things every American living in Switzerland should know about taxes
As an American living in Switzerland, there are some important things you need to know about taxes. Taxes For Expats has created a guide to help inform American expats about the tax system in Switzerland and the US and provide some tips on how to stay compliant.
The United States is one of the few countries that taxes international income received by citizens and permanent residents living abroad. For this reason, double taxation remains an issue, but there are some safeguards in place to prevent it. These include:
- A tax credit allowing the US tax bill to be reduced based on the income tax paid to foreign governments.
- An exclusion on housing held abroad which allows additional exclusions from their income to cover household expenses paid due to living abroad.
By following appropriate tax planning and preparing a quality tax return, you should be able to employ tactics to reduce or eliminate tax liability. Even if you don't live in the United States or a US region, or don't have any income from the United States, you must nevertheless file a tax return and pay taxes on all of your worldwide income.
Commonly asked questions about double taxation and paying US taxes in Switzerland
Expats from the United States can save a lot from escaping double taxation. Here are some answers to a number of questions that people commonly ask.
How do I report my income?
To register your income you will need:
- Gross salary if employed as shown on your salary certificate (Certificat de Salaire).
- Income from self-employment or an unincorporated business, which is reported in the self-employment income tab of the form.
- If employed, separately report the amount your employer has contributed to your Pillar 2 pension.
- Regular contributions to other social programmes, as reported on your salary certificate. Bear in mind that contributions to Pillar 1 pensions do not need to be displayed.
How do I report taxes paid?
Tax contributions must be reported separately for each form of income on which tax was paid, just like income streams. Line 12 of the salary certificate typically shows the amount of income tax withheld from salaries as a base amount. If you paid a federal or cantonal / local tax bill on income earned this year or the prior calendar year, apply that amount to the tax withheld from wages.
Wealth tax is not a part of income tax. It can be deducted on your US tax return as a part of itemised deductions.
How do you report tax deductions?
There are many tax deductions that are available to Americans living in Switzerland. Mortgage interest, alimony payments, and investment advisor fees are examples of such deductions. In addition, the US tax system, like the UK's personal allowance, has the concept of a "standard deduction." This amounts to 12.550 US dollars for a single individual and 25.100 dollars for a married couple for the 2021 tax year. For most Swiss residents filing a tax return in the United States, the standard deduction option is more tax effective than "itemised deductions," which are calculated by adding individual deductions together.
Avoid double taxation while benefitting from US and Swiss tax deductions
If you are an American who lives and works abroad, it is essential that you complete your US tax return in the right way, in order to avoid double taxation. For American expats living abroad, being accurate in your reporting and using the tools available like deductions can significantly reduce your tax bill.
This is just a snapshot of the various hurdles that have to be overcome in order to pay the right amount of taxes for the US and Switzerland, as well as avoid being taxed twice. With Taxes for Expats, you will have the peace of mind that everything is taken care of.