The interest on a loan is classed as debit interest and is tax deductible.
Tax benefits: The deductibility of interest is only possible in the case of a loan, and not in the case of leasing.
If you are uncertain about how to enter the interest on your loan on your tax return, BANK-now would be happy to help you.
For a lot of people, their tax return is a nuisance. This is not only because submitting it usually results in the payment of a large sum of money to the federal government, canton, and municipality. Many people are also simply not sure if they are doing everything right when filling out the forms. What deductions they can make. How to enter their debts correctly.
Many people are unaware that debt interest can be deducted from tax. And this includes interest that accrues on a personal loan. "Debt interest up to a maximum of CHF 50,000 plus investment income can be deducted to reduce tax," explains Bruno Besomi, Mittelland and Ticino Regional Manager at BANK-now. This tax-free amount is generally sufficient to cover all interest.
It is important to bear in mind that the deductible amount is not the entire amount that you transfer to the lender's account month after month – only the interest. The repayment portion does not count.
The debt interest accrued on credit cards as well as on private loans received from friends or family members, for example, is also tax deductible.
"The possibility of tax deduction is a big advantage over leasing," says Besomi. A vehicle lease, for example, is legally a rental arrangement. "Although the car is in the lessee's possession, the owner is the bank." Therefore, the interest cannot be deducted in the case of leasing. To those who ask whether it is better to finance a car with a personal loan or leasing, the following can be said: A loan is the better option from a tax perspective. For corporate clients, the situation may be different. Since companies, unlike private individuals, are also allowed to deduct the leasing interest from their taxes, this option may well be worthwhile.
Entering debt interest in your tax return is simple. In January, you will receive an interest certificate from BANK-now or your lender. You then enter the deductible interest and the residual value in the list of debts on your tax return. You enclose the interest certificate with your tax return.
You do not need to hire a personal tax advisor for this. The advisors at BANK-now will be happy to help you if you are unsure.