The equal tax treatment of working parents and those who (partially) look after their children themselves shall be ensured by granting a deduction for third-party childcare costs. The deduction has therefore been adjusted for direct federal tax and in most cantons with effect from the 2023 or 2024 tax year in order to ensure that taxation is more in line with economic performance.
Requirements for the deduction of third-party childcare costs
Married and unmarried couples as well as single parents can deduct childcare costs from their taxable income for direct federal tax as well as for cantonal and communal taxes. This deduction applies to all children who have not yet reached the age of 14 and live in the same household as the taxpayer responsible for their upkeep.
It should be noted that the costs for third-party care must be directly and causally related to the taxpayer’s employment, education or disability. Childcare costs that are of a private nature, e.g. so that the parents can pursue a leisure activity (‘babysitting’), are therefore not deductible. Further not deductible are costs for living expenses that would also be incurred if the parents were caring for the child themselves (e.g. costs for meals or clothing).
Furthermore, these must be actual and verifiable third-party costs (e.g. day care centre, after-school care, childminder, nanny, etc.), whereby certain maximum amounts apply. These maximum amounts were recently adjusted for direct federal tax and also on cantonal level. Based on the 2020 tax data for direct federal tax, the Federal Tax Administration carried out an analysis of tax deductions for childcare costs. The analysis showed that many taxpayers with children have utilised this deduction for small amounts that are significantly below the maximum deductions permitted.
Consequently, parents with a high workload in particular will benefit from the higher maximum amounts, or incentives to work are promoted by improving the compatibility of family and career for tax purposes.
Increase in the maximum deduction for direct federal tax
Until now, taxpayers were able to deduct verifiable third-party childcare costs up to a maximum amount of CHF 10,100 per child per year for direct federal tax purposes. For the 2023 tax period, the deduction was increased to CHF 25,000 per child. Furthermore, the maximum deduction was adjusted to CHF 25,500 as of 1 January 2024, which can be claimed for the first time in the 2024 tax return.
Cantonal increases in comparison
The cantons have also made adjustments to the maximum deductions for the purposes of cantonal and communal taxes. The cantonal maximum amounts differ considerably in some cases, whereby the amount of the maximum permissible deductions per child does not necessarily correlate with the income tax rates, which is illustrated by the following comparison:
