Deductible annual childcare costs for children under 14 will more than double from the current amount of CHF 10,100 to CHF 25,000 per child as of 1 January 2023 for Federal Direct Tax purposes. The conditions are that parents must be able to prove the costs and that they are in need of childcare (i.e. because they are working or studying).
Currently Swiss taxpayers can deduct in their Swiss tax returns an annual amount of CHF 10,100 per child under the age of 14 for Federal Direct Tax purposes. There is general agreement that for working spouses this amount does not cover the annual costs of adequate childcare. In an effort to support both the economy and working parents, the government has taken the decision to raise the deduction to CHF 25,000 per child as of 1 January 2023.
This change doesn’t impact deductible childcare expenses at the cantonal / communal level. Some cantons allow the same or more, such as Geneva (CHF 25,000). Others allow less, such as the Canton of Vaud or Zurich (both allowed a maximum deduction of CHF 10,100 in 2021).
To qualify for this deduction, the taxpayer must fulfil all the following conditions:
- The child lives with the taxpayer(s) claiming the deduction, and is under the age of 14 on December 31st of the tax year.
- For cohabiting parents, both parents are working or studying.
- For single parents, the same conditions apply: working or studying.
The costs must be documented when the deduction is claimed in the tax return, meaning that the provider of childcare support must be legally employed and social security contributions collected, as the case may be.
This increased deduction is a welcome change for working parents who will see their tax bill go down somewhat. It is to be hoped that those cantons offering a lower deduction will align their childcare deduction with the Federal one.
If you would like to discuss this topic, please do reach out to our key contacts below: