How to calculate the Income Tax

The income tax is the tax that people who are subject to regular taxation have to pay on their income, e.g. their salary. It is the main source of income for most cantons. But how is the income tax actually calculated? We will explain how to calculate the income tax using a simple example.

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What is the income tax?

The income tax is the tax levied as part of the regular assessment. It applies to all recurring and non-recurring income (Art. 16 para. 1 DBG / Art. 7 para. 1 StHG).

It is made up of income from self-employment or employment, investment income from movable or immovable assets, as well as income from pensions and a range of other income.

The sum of all taxable income forms the basis for calculating the tax.

What deductions are possible?

Various deductions can be made from the income earned. What remains after the permissible deductions constitutes the taxable income.

Profit costs, for example, are deductible. These are the costs that were necessary to generate the income. Profit costs also include contributions to pension plans (AHV and occupational pension plans). Profit costs must be distinguished from general costs or living expenses. The latter can only be deducted to an extent that is conclusively regulated in the StHG.

Deductible are, for example, interest on debts, contributions to pensions and insurance, the dual-earner deduction, allimony payments in the event of separation and divorce, as well as illness, accident and disability costs (Art. 33 & 33a DBG / Art. 9 para. 2 StHG). In addition, social deductions may be claimed.

Tax return deductions

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Tax return deductions

Calculate income tax - this is how!

Here is how to calculate taxable income:

Calculation

Total ncome

- Tax-free income

= Total taxable income

- Profit expenses

- General expenses

= Net income

- Social deductions / tax allowances

= Taxable income

The taxable income serves as the basis for determining the amount of tax owed. Using the taxable income and the respective cantonal tax scale, the absolute amount of income tax owed can be calculated.

Income tax calculation using the example of St. Gallen

As an example, we will calculate the tax in the canton of St. Gallen. The tax rate of the canton of St. Gallen is as follows:

No idea what the simple tax is? Check out this article first!

The simple tax on income is:

  • 0 percent for the first 11'000 4 percent for the further 4'000;

  • 6 percent for the further 17,000;

  • 8 percent for the further 25,000 9.2 percent for the further 36,000;

  • 9.4 percent for the further 157,000;

For taxable income above 250,000, the simple tax for the entire income is 8.5 percent.

The cantonal tax rate (2018) is 115, while the municipal tax rate averages 144.

If a person has a taxable income of 20,000 francs, what is the amount of tax payable?

On the first 11,000 francs, no tax is payable (11,000 x 0). For the next 4000 francs, an amount of 160 francs (4 percent of 4000; 4000 x 0.04) is due. On the last 5000 francs, simple tax of 300 francs is due (6 percent of 5000; 5000 x 0.06). The total simple tax amounts to 460 francs

This amount must now be multiplied by the tax rate (Steuerfuss). The actual tax to be paid is therefore 529 francs in the canton (460 x 1.15) plus 662.40 francs in the municipality (460 x 1.44). Therefore, an income tax of 1191.40 francs is due on the cantonal and municipal level.

Do you need help with calculating your income tax? The specialists at taxea are happy to assist you with their comprehensive expertise.