13 Feb SHOULD I GET MARRIED OR NOT, I MEAN IN TERMS OF TAXES?
Our team at Swissential are a pretty good representation of the different relationship statuses you find in society; The young eager bachelor, the recently married one, the “in the process of divorcing” (who generally gives advice to the recently married person, without much credibility), the young childless couple, the more mature couple with children on their way to university, and of course the newly remarried step family.
Setting aside love and feelings (we are a financial advisory firm after all), our consultants usually get the same question from our clients, “I have heard I will pay more taxes if I get married, is it true?”.
There are 5 parts to that questions: Administration, 1st pillar, 2nd pillar, your global income tax rate & Inheritance tax. As expected, the answer is both yes and no, depending on how restrictive you are with your answer and the structure of your earnings. Let’s look at why.
- Administration: Married = 1 point
Being married simplifies a lot of the day to day life. Consider just filing your taxes. Married couples file one tax return, unmarried couples have to file separate returns. This advantage, in case of divorce can also become a real Pandora’s box.
- 1st Pillar: Unmarried couples = 1 point
A full annuity for a couple after 43/44 years of contribution will never exceed 150% of a standard annuity for one person. Therefore, there is certainly a disadvantage for married couples in this regard.
- 2nd Pillar: Married = 1 point
Many pension foundations require at least 5 years of proven common living to offer the same benefits unmarried couples have than married ones. Often, too many foundations offer no benefits at all to unmarried couples, resulting in a significant loss should the worst happen to one of the members of the couple.
- Global Income tax rate: We have a tie
Depending on your canton of residence, the splitting of your income (50-50 or 70-30) and your total common revenue, you might pay more taxes should you get married. In general, the more you earn, the less beneficial it is to be married. For a combined income above CHF300’000, it is often better to not be married.
- Inheritance Tax: Married = 1 point
Forced heirship exist in Switzerland, it is therefore more difficult to protect a partner than a wife. Also, whilst there is virtually no taxes between spouses (up to 6% in Geneva above CHF500’000), taxes amount to 26% above CHF100’000 for partners.
All in all, if you are ready to pop the question, don’t let taxes prevent you from doing so as it is not a good enough excuse 😉
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Our mission is to help our clients fully understand their options and take control of their financial future by providing the right answers to their questions, and helping them make informed, decisions.