What tax deductions should you claim before the end of 2023?

The end of the year generally brings its share of professional and personal stress and the question that every taxpayer inevitably asks themselves: have I optimized my situation for the fiscal year which is about to end? Indeed, after Saint-Silvestre, it will be too late to take any corrective measures whatsoever. This is why it is important to plan ahead.

Among the questions that come up again and again:

1. Did I(must) contribute to 3^e pillar A?
2. Given my canton of residence and my family situation, can I claim some additional deductions that I had not thought of?
3. I carried out renovation work on my property. Will the workers finish within the agreed time frame?
4. Or do I have redemption capacity in my pension fund? Is it worth doing and for what amount?

So many questions that come up year after year and which we at Impact Financial Engineering SA are questioned about.

We wish to shed a different light on these reflections which are most of the time limited to tax considerations, highlighting other elements that should ideally be considered:

1. Redemptions in the pension fund (2^e pillar)

In addition to being deductible from taxable income, redemptions must be considered more broadly. Not only do they improve retirement conditions, but in many cases they are very useful for people wishing to prepare for early retirement. We then distinguish the redemption of contribution gaps (element linked to the past) from financing early retirement (element linked to your future).

Another point of importance is whether the insured anticipates an exit capital or annuity of old age benefits. This will influence the pace at which the insured will carry out redemptions in his pension fund.

Depending on the family situation, the health of the person concerned and several other parameters, it may be more or less interesting to make redemptions.

If the taxpayer anticipates a forward exit in capital exclusively, it will be necessary to go through the pension fund's regulations to ensure that this is indeed possible, with certain funds imposing limits on the capital exit and others on the amounts which will be paid as an annuity. Capital outflow is generally possible, except in most public law funds.

Many people met face cash flow problems to finance redemptions. It will be remembered that tax deductibility does not depend on the source of cash used for the redemption. We always remind you that the first thing to do is to request a modification of the installments for the current year so that the taxes paid monthly are in line with the redemption made or projected during the year, which can help to alleviate the possible cash flow problems.

When both spouses work they are generally affiliated to two different pension funds and can theoretically make redemptions in both. The question then arises: in what plan do I have an interest in buying back? An examination of the insured benefits, conversion rates and the strength of the pension fund will generally be sufficient to guide the insured towards the best choice.

2. The 3^e pillar A

Many solutions exist (banking, insurance, cash, invested) and sometimes for diversification and optimization purposes, it may be highly recommended to open one 2^e even a 3^e.

3. The 3^e pillar B

Some cantons (including Geneva and Fribourg) grant significant tax advantages to taxpayers. The bonus paid to a 3^e pillar B (Periodic premium life insurance) is largely deductible from taxable income in Geneva and Friborg for example. These payments also usefully improve retirement benefits, and it is regrettable to note that many taxpayers still shun this type of benefit savings solutions, yet very interesting.

4. Renovation work on real estate

We will remind you here that it is only the invoice date and not the end of the work which determines the year in which the deduction will be accepted. The cantonal tax authorities provide fairly detailed lists of deductible work (or not).

There are many avenues for optimization but they are not suitable for everyone. Only an individual analysis of each person's situation will make it possible to achieve the optimal solution.

Don't delay: act now to reduce your tax base 2023 !