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  • Writer's pictureLewis Grunfeld, CPA

Tax Guide For US Expats in Switzerland

Switzerland, renowned for its stunning alpine scenery, financial stability, and high quality of life, has become a sought-after destination for US expats. From the cosmopolitan atmosphere of Zurich to the picturesque landscapes of the Swiss Alps, Switzerland offers a unique and appealing experience for those seeking a new life abroad. However, amidst the charm of settling into this economically robust and culturally rich country, US citizens and green card holders must not overlook a crucial responsibility - their U.S. tax filing obligations. This guide aims to provide a comprehensive overview of everything expats need to know about managing their US tax responsibilities while living in Switzerland, ensuring they stay compliant and make the most of the available tax benefits.

Executive Summary

  • Filing Requirements: US expats must file taxes if income exceeds certain thresholds, varying by filing status and age.

  • Tax Benefits: Opportunities include foreign earned income exclusion and foreign tax credit to reduce tax liability.

  • Deadlines: Key deadlines are April 15th, with extensions to June 15th, October 15th, and December 15th for expats.

  • Compliance: Adherence to filing requirements is essential to avoid penalties like failure-to-file and interest charges.

Who Needs to File US Taxes from Switzerland?

Regardless of where you live, if your income exceeds certain thresholds based on your filing status, you are required to file a US tax return. These thresholds are adjusted annually for inflation. For the tax year 2023, the filing thresholds are as follows:

  • Single: If you are single and under 65, you must file if your income was at least $12,950. If you are 65 or older, the threshold increases to $14,700.

  • Married Filing Jointly: For couples under 65, the threshold is $25,900. If one spouse is 65 or older, it increases to $27,300, and if both are 65 or older, it's $28,700.

  • Married Filing Separately: This status has a much lower threshold. If you are married but file separately, you need to file a tax return if your income was at least $5, regardless of age.

  • Head of Household: If you qualify for this status, the threshold is $19,400 for those under 65. For those 65 and older, it's $21,150.

Expert Insight: Even if your income is below these thresholds, there may be other reasons to file a tax return, such as claiming a refundable tax credit or report significant interest in a foreign corporation.

Switzerland vs US Taxes

In Switzerland, the tax system is quite different from that of the United States, especially in terms of how it treats individual and married taxpayers. Unlike the U.S., where the tax system has separate brackets for single and married individuals (including options like 'married filing jointly'), Switzerland's tax system is a mix of individual and communal taxation. Each person in Switzerland is responsible for filing their own tax return based on personal income, but married couples are taxed jointly, which is a significant difference from the U.S. system.


Swiss income tax rates are progressive, with rates varying significantly depending on the canton and municipality. The federal tax rates range from around 0% for the lowest income earners to about 11.5% for the highest income earners, but when cantonal and municipal taxes are included, the total tax rate can be considerably higher. These local taxes, which vary greatly from one region to another, add complexity to the overall tax burden in Switzerland.


In contrast, the U.S. tax system offers various filing statuses, including 'single', 'married filing jointly', and 'married filing separately'. This flexibility allows American taxpayers to choose the filing status that best suits their financial situation. The U.S. system also features progressive tax brackets, but these are applied at the federal level without the significant regional variations seen in the Swiss tax system. U.S. federal tax rates generally range from 10% to 37%, applied to the aggregate of all income types.


U.S. Tax Brackets for 2023 Tax Year (Filed in 2024)

Taxable income range - single filing status

Taxable income range - married filing jointly

Tax Rate (%)

$0 to $11,600

$0 to $23,200

10%

$11,601 to $47,150

$23,201 to $94,300

12%

$47,151 to $100,525

$94,301 to $201,050

22%

$100,526 to $191,950

$201,051 to $383,900

24%

$191,951 to $364,200

$383,901 to $462,500

32%

$364,201 to $462,500

$462,501 to $693,750

35%

Above $462,500

Above $693,750

37%

US Tax Deadlines for Expats in Switzerland

US expats residing in Switzerland must be mindful of several critical tax return deadlines, which differ from those typically faced by taxpayers within the United States. While April 15th is a well-known deadline for all U.S. taxpayers, expats have additional dates to consider. If any of these deadlines occur on a weekend or a U.S. federal holiday, the due date will be adjusted to the next business day.


  • April 15th: Standard filing deadline for US taxpayers.

  • June 15th: Automatic two-month extension for US citizens living abroad.

  • October 15th: Extended deadline for those who request an extension before the June 15th deadline.

  • December 15th: Additional extended deadline for thoes who requested the additional 2 month overseas extension.

Expert Insight: While extensions are available, they only extend the time to file, not the time to pay any taxes due.

What Tax Credits and Income Exclusions Can Expats in Switzerland Claim?

Understanding the various tax credits and income exclusions available is essential for expats to minimizing their tax liability and ensuring compliance with U.S. tax laws. Below, we explore some of the key tax credits and income exclusions that are particularly relevant for US expats in Switzerland:

  • Foreign Earned Income Exclusion: The foreign earned income exclusion is a significant benefit for U.S. expats, allowing them to exclude up to $120,000 (as of 2023) of their income earned in a foreign country from U.S. taxation. To qualify, expats must meet certain requirements, such as the physical presence test or the bona fide residence test, demonstrating that they have been living and working in a foreign country for a specified period.

  • Foreign Housing Exclusion: The foreign housing exclusion allows expats to deduct a portion of their housing expenses incurred while living abroad from their taxable income. The exclusion covers various housing costs, including rent, utilities (except telephone charges), and certain insurance premiums. The amount of exclusion depends on the location and can vary significantly based on the local cost of living.

  • Foreign Tax Credit: The foreign tax credit is designed to prevent double taxation for Americans paying taxes in both the U.S. and a foreign country. It offers a dollar-for-dollar credit against U.S. taxes for any income taxes paid to a foreign government. This credit is particularly beneficial for expats residing in countries with high tax rates, as it can significantly reduce or even eliminate their U.S. tax bill.

  • Refundable Child Tax Credit: The child tax credit provides a financial boost to expats with children, offering up to $1,500 per child as a refundable credit. To be eligible, children must meet certain requirements, such as age and dependency criteria.


Penalties for Late or Incorrect US Tax Filing

Understanding and adhering to tax filing requirements is crucial to avoid penalties. These penalties can be significant and include:

  • Failure-to-File Penalty: Generally 5% of unpaid taxes for each month the return is late, up to 25%. If filed more than 60 days late, the minimum penalty is the lesser of $435 or 100% of the unpaid tax.

  • Failure-to-Pay Penalty: Typically 0.5% of the unpaid taxes for each month or part of a month after the due date, until fully paid.

  • Fraud Penalties: If inaccuracies are due to fraud, penalties can be up to 15% per month, with a maximum of 75%.

  • Interest Charges: Compounded daily from the due date of the return until the tax is paid in full, calculated at the federal short-term rate plus 3%.


Essential IRS Tax Forms for Expats Residing in Switzerland

It's crucial to be aware of the different IRS forms that apply to your situation. Understanding and correctly filing these forms is key to ensuring tax compliance and optimizing your tax situation. The following are some of the most important tax forms that U.S. expats need to be familiar with:

  • Form 1116 (Foreign Tax Credit): This form is used to claim a credit for income taxes paid overseas, helping to avoid double taxation on the same income.

  • Form 2555 (Foreign Earned Income): Essential for those claiming the Foreign Earned Income Exclusion, this form allows expats to exclude a certain amount of their foreign earnings from U.S. taxation.

  • Form 8938 (Statement of Specified Foreign Financial Assets): This form is for reporting certain foreign financial assets, including bank accounts, investments, and assets held through foreign entities. The reporting threshold varies based on filing status and whether you live in the U.S. or abroad.

  • Form 8833 (Treaty-Based Return Position Disclosure): Used when a taxpayer takes a position that a U.S. tax treaty with a foreign country overrules or modifies the provisions of the U.S. tax law. It's essential for expats who are claiming treaty benefits that impact their U.S. tax.

  • Form 5471 (Information Return of U.S. Persons With Respect to Certain Foreign Corporations): This form is required for U.S. citizens who are officers, directors, or shareholders in certain foreign corporations. It's a critical form for expats involved in foreign businesses to report their foreign corporation's activities and comply with U.S. tax laws.


Catching Up on Overseas Filing From Switzerland

US expats in Switzerland who haven't filed their US tax returns might be eligable to use the IRS Streamlined Filing Compliance Procedures to get back into compliance. This program allows for filing the last three years of tax returns and six years of FBARs without late penalties, provided your failure to file was non-willful and the IRS hasn't already contacted you about the delinquent filings. It's crucial to act quickly, as eligibility for this lenient approach is lost if the IRS initiates contact first. This program is an excellent opportunity for expats who were unaware of their filing obligations to become compliant with minimal repercussions.


Does the US Have a Tax Treaty with Switzerland?

Yes, the US and Switzerland have a tax treaty in place, but it's important for US expats to note that many benefits of this treaty are limited due to the 'savings clause.' This clause essentially allows the US to tax its citizens as if the treaty didn't exist, which means that most treaty benefits don't apply to US expats. Despite this, the treaty still plays a crucial role in preventing double taxation on income such as pensions, dividends, and interest, by clarifying how these types of income are taxed by each country.


Social Security Taxes for Self Employed Expats in Switzerland

Self-employed U.S. expats living in Switzerland are only subject to Swiss social security taxes, not U.S., thanks to the US-Switzerland totalization agreement. This agreement helps US expats avoid double taxation on social security by specifying that their contributions are due only in the country where they are working.


Foreign Bank Account Reporting

In addition to their tax filing obligations, US citizens who have a combined maximum value of more than $10,000 in foreign financial accounts at any point during the tax year also need to file the Foreign Bank and Financial Accounts Report (FBAR). The FBAR, or FinCEN Form 114, is a critical measure for informing the U.S. government about Americans' overseas financial activities, playing a significant role in the prevention of tax evasion. It's crucial for expats to understand that failing to file the FBAR can result in severe penalties, including fines of up to $10,000 for non-willful violations.


Need Help With Filing Your U.S. Taxes From Switzerland?

At CPAs for Expats, we specialize in helping US expats stay compliant with their US taxes. Our low fees and 4.9/5 rating on independent review platforms attests to our commitment to excellence and client satisfaction. Contact us today, and let our tax experts simplify your life and taxes.




Frequently Asked Questions

The following are some of the more common questions we've encountered from our Swiss clients throughout our many years of servicing the US expat comunity in Switzerland.

Do US expats have to pay taxes while living in Switzerland?

What is the deadline for US expats to file taxes in Switzerland?

Can US expats in Switzerland claim the foreign earned income exclusion?

Is there a tax treaty between the US and Switzerland to avoid double taxation?

What is the FBAR requirement for US expats in Switzerland?


Article by Lewis Grunfeld, CPA

Lewis Grunfeld, CPA, is a renowned expert in international and U.S. expat taxation, with expertise spanning over ten years. He has successfully helped thousands of expats around the world navigate and comply with U.S. tax laws, and achieve significant tax savings. His work is driven by a strongly rooted passion for assisting the expatriate community through a wide range of tax challenges, ensuring tailored solutions for each unique situation.

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