Many debtors know that it is possible to deduct a credit’s interest from their tax return. Unfortunately, this simple method that sometimes saves important figures is often forgotten. We will show you how to use your tax advantage as a debtor and clarify important questions about this subject.
What can be deducted?
In Switzerland, the Confederation, cantons and municipalities collect their taxes separately. The Confederation and the cantons levy income taxes and the municipalities collect income and luck. Individuals, every year, have the opportunity to include certain expenses on their tax return which will reduce their income so as not to pay taxes. The interest paid on the loans is part of these expenses, which is why the amounts transferred for the loans are exempt from taxes for the Confederation and the cantons! In other words, your taxable amount is deducted from the interest paid.
Attention : As a consumer credit holder, transfer an amount every month to the credit bank. This sum not only includes interest but also part of the repayment of your loan. The interest paid is the only tax relief available, but the repayment is not.
What interests can I deduct?
All interest paid and tied to a private credit is tax deductible. This means that it is possible to deduct the costs of personal loans, consumer loans, mortgages, loans to private third parties and even credit card interest. If for example, during the year, you paid interest on a sum lent to a private individual (such as friends and relatives), you should ask him for a precise statement about the interest paid, so that he can deduct it. Note: a lease is not considered a loan and the interest paid cannot be deducted from your income.
How much can I save?
The savings potential of the loans naturally depends on the amount of interest paid which will in turn depend on the amount of the loan requested, the duration and the rate. Savings also vary according to your income and the canton of residence: for example if you earn USD 30,000 per year in the canton of Bern, you will pay 5.6% of income tax; if you earn USD 100,000 per year, you pay 17,5%. For example, suppose that a loan of USD 25,000 over 36 months with an interest rate of 9.9% in the first year costs around USD 1,800 of interest and that the holder of the latter loan pays, in its canton of residence, 10% of income taxes will have saved 180 francs on cantonal taxes. Furthermore, it should not be forgotten that the savings potential is even higher, as this type of deduction is also possible at the Federal Confederation!
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