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Old 18.01.2012, 18:45
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Confused on taxes for Americans over the 120k CHF threshold

My husband and I are considering a job offer in Zug (although we'd ideally like to reside in Luzerne or Zurich). I have found some excellent information on this website about taxes in the US for expats, and how standard deductions work in Switzerland under the 120,000 CHF/year threshold. How the taxes work OVER this threshold is still very mysterious to me. Unfortunately, I need to get a better understanding of this before we can commit to taking this job offer. A few basic questions -
*Are there some good resources in English to learn more about the wealth assessment ?
*Is $1000 CHF a sufficient budget to have an accountant assist us with taxes ?
*Are things like my IRA and 401k subject to this "wealth assessment" ?
*What kind of assessment will be applied to my current liquid assets (ie cash and stock accounts) ?
*For those that pay US taxes and this wealth assessment - does the double taxation arrangement protect us here, or should I plan on having to pay both things ?

I apologize for the rookie questions! We are really hoping we can make the move to Switzerland work, but so much hinges on how much the taxes over the 120k threshold will be costing us every year...
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Old 18.01.2012, 19:05
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Re: Confused on taxes for Americans over the 120k CHF threshold

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My husband and I are considering a job offer in Zug (although we'd ideally like to reside in Luzerne or Zurich). I have found some excellent information on this website about taxes in the US for expats, and how standard deductions work in Switzerland under the 120,000 CHF/year threshold. How the taxes work OVER this threshold is still very mysterious to me.
Your income over 120'000 is treated exactly like your income under CHF120'000 -- your tax ('quellensteuer') will be withheld by your employer each month at a rate determined by your monthly pay. Here is the table of Quellensteuer rates for Canton Zug. This table is for a family where both partners work -- there are similar tables available for single earners.

In this example, if you were earning 180'000 a year (15'000 a month), you would be taxed at source at a rate of 9.21% if you were the husband, or 10.67% as a wife, assuming no kids. (Don't get started on sexual inequality. That's the way the system works here).

If you earn less than CHF120'000 a year, that's it. You've met your tax liability. If you earn over 120'000 a year, however, you need to file a return at the end of the year. This can either work out in your favour or against you, depending on your circumstances, and you'll either get a small refund or have to pay a small additional payment. But in either case, the tax withheld should cover the lion's share of your liability.

You'll need to pay wealth tax, too, but this isn't typically a huge amount (unless you're hugely wealth) and it doesn't kick in until a certain level -- from memory, about CHF250'000 in assets. Here's a thread with some tools to help you find out what it might be in your case:

Property/Wealth tax in canton Zug

Don't pop the champagne corks quite yet. If your Swiss tax liability is significantly less than your US tax liability, you'll probably owe a check to Uncle Sam as well. It's a false economy for most Americans to live in low tax cantons, as rents are higher but you don't profit from the lower taxes (as you'll owe the balance to the US).

Quote:
*Is $1000 CHF a sufficient budget to have an accountant assist us with taxes ?
This is more than enough to cover the Swiss tax filing, but you'll probably need to budget a similar amount to cover your US filing as well. If you haven't filed a US tax return as an expat before, it's highly recommended to use a professional at least in the first year.

Quote:
*Are things like my IRA and 401k subject to this "wealth assessment" ?
Yes

Quote:
*What kind of assessment will be applied to my current liquid assets (ie cash and stock accounts) ?
These are all treated as wealth and will be included in the calculation of your wealth tax.

Quote:
*For those that pay US taxes and this wealth assessment - does the double taxation arrangement protect us here, or should I plan on having to pay both things ?
Yes, you can exempt the tax paid as wealth tax from your US taxes -- you do this as part of the Foreign Tax Credit (form 1116).

A lot of people get worked up when they hear about the wealth tax, but unless you have very substantial wealth, the amount isn't likely to be enough to be a dealbreaker one way or another for making a move. As an example, with CHF250'000 in wealth, you wouldn't pay any wealth tax, and with CHF500'000 in wealth would pay about CHF350 a year; CHF1'000'000 would pay about CHF1'750 a year and someone with CHF5'000'000 would pay around 13'800.

Here's a presentation that gives a reasonable overview of Swiss taxes, in English. Note that slide 11, which I've used to calculate the wealth tax examples above, is quoted permille (‰), not percent (%).

Last edited by Village Idiot; 18.01.2012 at 19:17.
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Old 18.01.2012, 19:10
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Re: Confused on taxes for Americans over the 120k CHF threshold

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My husband and I are considering a job offer in Zug (although we'd ideally like to reside in Luzerne or Zurich). I have found some excellent information on this website about taxes in the US for expats, and how standard deductions work in Switzerland under the 120,000 CHF/year threshold. How the taxes work OVER this threshold is still very mysterious to me. Unfortunately, I need to get a better understanding of this before we can commit to taking this job offer. A few basic questions -
*Are there some good resources in English to learn more about the wealth assessment ?
*Is $1000 CHF a sufficient budget to have an accountant assist us with taxes ?
*Are things like my IRA and 401k subject to this "wealth assessment" ?
*What kind of assessment will be applied to my current liquid assets (ie cash and stock accounts) ?
*For those that pay US taxes and this wealth assessment - does the double taxation arrangement protect us here, or should I plan on having to pay both things ?

I apologize for the rookie questions! We are really hoping we can make the move to Switzerland work, but so much hinges on how much the taxes over the 120k threshold will be costing us every year...
1000 is probably enough.
Any investments you tell them about are subject to wealth tax using market value.
Wealth tax is less in ZH than LU, however it starts getting noticeable above a couple of million.

This is where you can put the no's in to get an idea,
http://www.zkb.ch/de/startseite/priv...ngemeinde.html
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Old 18.01.2012, 19:15
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Re: Confused on taxes for Americans over the 120k CHF threshold

Thank you for the amazing wealth of information - you are so kind to write such a detailed, helpful reply. I apologize again, because I realize everything was probably hidden in the forums somewhere and I was just unable to find it!

Ok, in a nutshell what I'm getting out of this is that say the salary was 180,000 CHF - I should assume we will be paying the higher of US or Swiss taxes on that amount, and I shouldn't stress so much on the wealth tax.

Unfortunately, for us, we own production on various oil and natural gas wells in the US. I do worry the taxes on that will be a nightmare, but I hate for that to be a reason for us not to move.
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Old 18.01.2012, 19:17
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Re: Confused on taxes for Americans over the 120k CHF threshold

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1000 is probably enough.
Any investments you tell them about are subject to wealth tax using market value.
Wealth tax is less in ZH than LU, however it starts getting noticeable above a couple of million.

This is where you can put the no's in to get an idea,
http://www.zkb.ch/de/startseite/priv...ngemeinde.html
Thank you for the link!!!
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Old 18.01.2012, 19:21
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Re: Confused on taxes for Americans over the 120k CHF threshold

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Ok, in a nutshell what I'm getting out of this is that say the salary was 180,000 CHF - I should assume we will be paying the higher of US or Swiss taxes on that amount, and I shouldn't stress so much on the wealth tax.

Unfortunately, for us, we own production on various oil and natural gas wells in the US. I do worry the taxes on that will be a nightmare, but I hate for that to be a reason for us not to move.
Yes, you've got it broadly right. It's not quite as simple and straightforward as that, but as a tool for estimating you should assume the higher of US or Swiss taxes, and not worry too much about the wealth tax.

I've edited my original post to share a few more links -- have a look.

I'm not sure how you own the oil & gas wells -- if they're simply K-1 holdings (MLPs) then you shouldn't have too much trouble reporting them.
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Old 18.01.2012, 19:22
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Re: Confused on taxes for Americans over the 120k CHF threshold

Here's a presentation that gives a reasonable overview of Swiss taxes, in English. Note that slide 11, which I've used to calculate the wealth tax examples above, is quoted permille (‰), not percent (%).[/QUOTE]

Fantastic Presentation!!! Thank you for the link!
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Old 18.01.2012, 19:24
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Re: Confused on taxes for Americans over the 120k CHF threshold

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Yes, you've got it broadly right. It's not quite as simple and straightforward as that, but as a tool for estimating you should assume the higher of US or Swiss taxes, and not worry too much about the wealth tax.

I've edited my original post to share a few more links -- have a look.

I'm not sure how you own the oil & gas wells -- if they're simply K-1 holdings (MLPs) then you shouldn't have too much trouble reporting them.
Yes, they are MLPs - I will look into how that will work, hopefully it's not a total nightmare. We don't own a lot of assets by Swiss standards so this is making me feel much better! I will worry about the insane US tax rate rather than the wealth tax, now.

Thank you so much!
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Old 18.01.2012, 20:56
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Re: Confused on taxes for Americans over the 120k CHF threshold

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Yes, they are MLPs - I will look into how that will work, hopefully it's not a total nightmare. We don't own a lot of assets by Swiss standards so this is making me feel much better! I will worry about the insane US tax rate rather than the wealth tax, now.
This is relatively straight-forward. For the Swiss wealth tax purposes, they are declared at the (unit price) X (number of units held) on 31 December.

From a US point-of-view, you have to do all the associated K-1 paperwork just as you would if you were in the US. In other words, from a US perspective, they're a hassle -- but no more of a hassle than normal!
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Old 18.01.2012, 21:07
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Re: Confused on taxes for Americans over the 120k CHF threshold

I do have another random question for all the US tax experts around here! It seems there is a portion of income earned abroad that is not taxed (that amount roughly to the first $90,000 of income). My confusion lies in the "Foreign Housing Exclusion". Is this available to everyone or only the self employed? Is this additive with the FEIE, or does this work against the FEIE ?
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Old 18.01.2012, 21:10
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Re: Confused on taxes for Americans over the 120k CHF threshold

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I do have another random question for all the US tax experts around here! It seems there is a portion of income earned abroad that is not taxed (that amount roughly to the first $90,000 of income). My confusion lies in the "Foreign Housing Exclusion". Is this available to everyone or only the self employed? Is this additive with the FEIE, or does this work against the FEIE ?
I am a US citizen living here for over a decade. Been filing 1040s every year, also paying Swiss tax the whole time. Income very similar to your quote. Never ran into any trouble with the tax authorities, either here or there. It's actually not that complicated. PM me if you want more info.
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Old 18.01.2012, 21:33
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Re: Confused on taxes for Americans over the 120k CHF threshold

And one last easy question... Does this link

http://www.zkb.ch/de/startseite/priv...ngemeinde.html

include the mandatory pension contributions, or is this purely taxes? Sorry, I am having trouble understanding the German terms.
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Old 18.01.2012, 22:03
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Re: Confused on taxes for Americans over the 120k CHF threshold

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*Is $1000 CHF a sufficient budget to have an accountant assist us with taxes ?
Looks like the others are covering your questions, but one thing you'll want to know: you just said 1000 dollars swiss francs. For some reason, a lot of Americans associate "$" with currency, but it's not - it is very specific to the US currency. Swiss francs don't have a symbol, but we just write 1000 CHF or CHF 1000.
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Old 18.01.2012, 22:09
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Re: Confused on taxes for Americans over the 120k CHF threshold

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I do have another random question for all the US tax experts around here! It seems there is a portion of income earned abroad that is not taxed (that amount roughly to the first $90,000 of income). My confusion lies in the "Foreign Housing Exclusion". Is this available to everyone or only the self employed? Is this additive with the FEIE, or does this work against the FEIE ?
Hi, it's available to company employees as well. I would honestly talk to a qualified US tax accountant before you commit. As said before unless you are very wealthy forget about the wealth tax. You want to estimate your income, Swiss taxes both of which should be relatively easy. Then ask a US accountant what your return would look like. People's circumstances are all different but as a general rule once you start earning over about $120k you are possibly to pay Swiss taxes and start to accumulate US tax liability. Also note the $90k foreign income exclusion is per person so if there are two of you and you can split income (if one person has a wage the other can have investment income may depend on source of investment income) maybe another way to lower US tax liability. These strategies are exactly the reason to seek professional advice before you commit. Probably cost you $500 and I'd be surprised if it's not worth it just for the peace of mind.
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Old 18.01.2012, 22:10
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Re: Confused on taxes for Americans over the 120k CHF threshold

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I do have another random question for all the US tax experts around here! It seems there is a portion of income earned abroad that is not taxed (that amount roughly to the first $90,000 of income). My confusion lies in the "Foreign Housing Exclusion". Is this available to everyone or only the self employed? Is this additive with the FEIE, or does this work against the FEIE ?
You get the Foreign Housing Exclusion as well (in addition to the FEIE), but remember that there are caps on the amount you can deduct. I don't have the form in front of me, but it's about CHF3'000 per month in most of Switzerland except Zurich and Geneva, where the allowance is higher.

I'm not sure if you've seen this yet, but this is an extremely comprehensive guide to your US tax position when you live abroad:

FAQ: Expat's Guide to US Tax
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Old 19.01.2012, 17:26
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Re: Confused on taxes for Americans over the 120k CHF threshold

The 2011 Foreign Housing Exclusions limits for the following are:
Bern -- $63,200
Geneva -- $87,200
Zurich -- $39,219
All other cities then those listed above -- $32,900
IRS provides the amounts on the Instruction to the Form 2555 - http://www.irs.gov/pub/irs-pdf/i2555.pdf
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Old 19.01.2012, 17:35
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Re: Confused on taxes for Americans over the 120k CHF threshold

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"$" is very specific to the US currency
$ also works for Canada, Australia, New Zealand, Singapore, Ecuador, Belize, the Bahamas, Mexico, Cuba, Uruguay, Chile, Argentina, the Dominican Republican, the Philippines and Colombia.
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Old 19.01.2012, 18:00
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Re: Confused on taxes for Americans over the 120k CHF threshold

Im thinking of just not filing for tax returns this year in the US...would they find me? I'm good at staying low keyyy
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Old 19.01.2012, 18:26
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Re: Confused on taxes for Americans over the 120k CHF threshold

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I am a US citizen living here for over a decade. Been filing 1040s every year, also paying Swiss tax the whole time. Income very similar to your quote. Never ran into any trouble with the tax authorities, either here or there. It's actually not that complicated. PM me if you want more info.

Karl, I need some help. I am potentially entertaining a contract to go to Switzerland. Is there a limitation on the how much of the pension I will get back after I leave Switzerland?

Do you know a good tax accountant for international work?
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Old 20.01.2012, 07:58
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Re: Confused on taxes for Americans over the 120k CHF threshold

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a lot of Americans associate "$" with currency, but it's not - it is very specific to the US currency.
And the New Zealand
And the Australian
And even the Singaporean
And... who else uses dollars?
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