In Switzerland, interest on consumer loans is tax-deductible. You can deduct the interest you paid from your income in your tax return – for direct federal tax as well as cantonal and municipal taxes. At the same time, the remaining debt reduces your taxable wealth.
What Exactly Is Deductible?
- Deductible: Loan interest paid (the interest portion of the installment)
- Deductible: Interest from credit card installment payments
- Not deductible: Outstanding debt on wealth
- Not deductible: Outstanding debt on wealth
What matters: only the interest portion of your monthly loan installment is deductible, not the entire installment. For a monthly installment of CHF 500, the interest portion might be CHF 150 depending on the remaining debt and interest rate – only those CHF 150 are deductible.
A Double Tax Advantage
A consumer loan brings two tax advantages at once:
- Income deduction: The interest paid is deducted from taxable income.
- Wealth reduction: The remaining debt as of December 31 is declared in the schedule of debts and reduces your taxable wealth. With a remaining debt of CHF 40'000, you pay correspondingly less wealth tax.
Limits on the Interest Deduction
The deduction of debt interest is capped at the amount of taxable investment income plus CHF 50'000 (direct federal tax, Art. 33 para. 1 lit. a DBG). Cantonal limits may differ. For most private individuals with a consumer loan, this cap is not relevant – annual loan interest typically stays well below it.
How to Declare It Correctly
- Request an interest statement: Your lender issues you an annual statement of the interest paid during the calendar year. Some banks send it automatically, others require you to request it.
- Enter the debt interest: Enter the amount of interest paid in your tax return under "debt interest."
- Declare the remaining debt: Enter the remaining debt as of December 31 in the schedule of debts (name of the creditor, remaining amount).
- Keep your records: Keep the interest statement and loan agreement for at least 10 years.
Calculation Example
Loan: CHF 30'000, interest rate 7.9%, term 48 months.
In the first full calendar year, you pay around CHF 2'100 in interest. At a marginal tax rate of 30% (federal + cantonal + municipal), that works out to a tax saving of about CHF 630. In addition, the remaining debt (e.g., CHF 22'000 as of December 31) reduces your taxable wealth.