Understanding your income taxes in the canton of Vaud

Introduction

Welcome to this new article, the main aim of which is to help you better understand how income tax works in the canton of Vaud. We will answer key questions such as: What income is taxable? What are the income tax rates in the canton of Vaud? What can be deducted from tax? And most importantly, how is tax calculated, taking into account our local speciality, the family quotient?

At FBKConseils, we find that, year after year, our clients who take the time to learn at least the basics of the Swiss tax system have a better view of their budget. They have a better grasp of the impact that a life change can have on their tax situation, and are able to consider strategies for optimising their tax burden. In this way, they can determine whether their annual tax assessment has been carried out correctly or whether, on the contrary, it is necessary to investigate.

What are the income tax rates in the canton of Vaud?

The first thing to understand is that in the canton of Vaud, the tax rate depends on your family situation and on what we Vauders call the “family quotient”. This system, although specific to the canton, is quite similar to the one used by our French neighbours, which operates on a similar principle of reducing the tax rate according to the composition of the household. Before delving into the details of this mechanism, remember that the larger your household (marriage, children, etc.), the lower the rate of tax applied to your taxable income. What’s more, each commune in the canton of Vaud has a certain amount of freedom in setting its tax rates. Variations between communes can range from 0% to 5% between the most severe and the most lenient commune in terms of taxation.

To provide you with a concrete example of tax rates in the canton of Vaud, we offer you an overview for the year 2024 based on your situation in the commune of Lausanne. Bear in mind that many other communes could offer much more advantageous tax conditions.

What does this table tell us? After deducting your employer’s social security contributions and applying all authorised tax deductions, your gross income will be taxed at a rate ranging from 7% to 41%. This illustration takes into account all taxes – cantonal, municipal and federal.

Step 1: Determining your taxable income in the canton of Vaud

We won’t take any more time in this article to define the income that will be taxed, as we have already written a detailed article on this subject. In addition, there is another article specifically dedicated to the tax deductions applicable in the canton of Vaud. By combining these two resources, you should be able to easily calculate your taxable income. This calculation is the first essential step in understanding your tax situation.

Article 1 : Understanding how to go from your gross income to your taxable income in Switzerland

Article 2 : What deductions are permitted in the canton of Vaud?

Step 2: Define your qualifying income for the rate

This is where things get complicated. In Switzerland, once you have defined your taxable income (the income that will actually be taxed, as mentioned in the previous paragraph), you need to determine the rate at which that income will be taxed. This is precisely where the special Vaud feature comes into play: the family quotient. This is a factor that varies according to the size of your household and will be used to divide your taxable income, directly influencing the rate of tax applied.

Step 3: Determine your family quotient in the canton of Vaud

« My what now ? »

Your family quotient.

And if you are wondering whether this term refers to an IQ test your whole family will have to take… No, that’s not it. 

As you probably know, tax returns are done per household. Therefore, each household gets a family quotient to determine their tax rate. The more people you have in your household, the higher the family quotient will be and the lower the tax rate. This is a key step before you start calculating tax.

• Single, divorced, widow(er), or taxed separately: your family quotient is of 1: Your taxable income will be taxed at the same rate.
• married couple without children or registered partnership without children: your family quotient is of 1.8: Your taxable income will be divided by 1.8 to determine the tax rate.
• Single-parent household: your family quotient is of 1.3

Then, add 0.5 points for each dependent child.

Example…

You are a young married couple without children, your family quotient is of 1.8. 

You are a young married couple with one child, your family quotient is of 2.3. Two children? Your family quotient is of 2.8.

You are a young non-married couple with one child (it goes by the sweet name of concubine), your family quotient is of 1+0.5=1.5. Two children? Your family quotient is of 1+0.5+0.5=2. 

You are a single mother with a dependent child, your family quotient is of 1.3+0.5=1.8. Two dependant children? Your family quotient is of 1.3+0.5+0.5=2.3.

What does this mean in concrete terms?

Imagine, your household has a taxable income of 100,000 CHF with a 2.3 quotient (married with one child).

You divide 100,000 by 2.3 and you get the relevant income for the calculation of the final taxation rate of 43,400 CHF.

The people in charge of determining your taxes will look for the rates corresponding to 43,400 CHF (in the table below) and then apply it to your total income of 100,000 CHF. In this case, for an income of CHF 43,400 (as taxes are specified by bracket of hundreds of income) the corresponding rate is 6.509%, applied to 100,000 CHF, this gives us a base tax of 6’509 CHF (valid for 2024).

You are single, without any children (quotient 1) and your taxable income is 100,000 CHF? in this case, your final taxable income remain unchanged: 100,000 CHF for a basic tax of CHF 7,528.55 in 2024.

And as always, don’t panic, we’ll take the time in the next paragraph to explain how we arrived at this basic tax.

Please note: This quotient system only works like this if your household is not considered a privileged household. If your income exceeds a certain level, you will no longer be able to increase your family quotient for each child. But they will allow you to deduct a fixed amount while keeping your previous family quotient. 

Remember that you can minimise your taxable income by taking into account all the tax deductions you are entitled to.

Great news: the heavy lifting is done!

Step 4: Applicable scale in the canton of Vaud : how does it work?

At this stage of the article, we’ve already done half the work: we’ve established :

• Your taxable income, the income that will be taxed.
• The income that determines the rate thanks to the family quotient.

Now we need to use the Vaud tax scales available to us to calculate the tax that will be due.

What is a scale?

Put simply, it is the bracket within which your determining income is calculated using your family quotient.

Let’s take two simple examples:

Example 1: single person, without children and with a taxable income of 50’200 CHF, then we divide by 1, which gives again 50’200 CHF… obviously… After calculating discussions, you determined, for instance, that the taxable amount is 50’200 CHF.

Example 2: Married couple with one child, and a taxable income of 115,500 CHF, then we divide by 2.3 (1.8 + 0.5), which gives 50,217 CHF (this way, we keep the same rate of the 50,200 CHF bracket, but not the same tax amount!)

At this stage, you have to refer to the table listing the various income brackets. 

Each canton has its own table. (Please note that the canton of Vaud does not make its rates available until the beginning of the following year, so this link concerns 2023).

Nevertheless, at FBKConseils we have already updated part of the scale for 2024 and this is what it looks like:

For our example 1: with the taxable income of 50,200 CHF, you can see that the base tax is 3’437 CHF corresponding to a tax rate of 6.847%.

In example 2: with a taxable income of CHF 50,200, we will take the corresponding rate, i.e. 6.847%, and apply it to our household taxable income of CHF 115,500. This gives us a basic tax of : 115’500 * 0.06847 = 7’874.05 CHF.

Little by little, the bird makes its nest. After the above calculation, we arrive at what is known in the canton of Vaud as the basic tax. For example, for the first scenario, the basic tax is CHF 3,437, and for the second example, it is CHF 7,874.05. It is from this basic tax that we will finally be able to calculate the Vaud cantonal tax as well as the municipal tax.

Keep those base taxes in mind and move on to the next step.

Feeling lazy? Check out our fiscal calculator!

Step 5: Calculate cantonal and municipal tax in the canton of Vaud

Phew! We are reaching final stages.

Now we have the most important figure: Basic tax.

Basically, we will simply take the basic tax and multiply it by the cantonal rate, then in a second step by the communal rate. The addition of the two results will give us our total ICC tax.

How to calculate cantonal tax?

Each year, the canton publishes its tax rate, which applies throughout the year to all communes. The tax rate in the canton of Vaud was fixed at 155% for 2021, 2022, 2023 and 2024.

Which means that:

• In example 1: I owe 3’437 CHF * 155% = 5’327,35 CHF in taxes to the canton of Vaud.
• In example 2: We owe 7’874.05 CHF * 155% = 12’204.77 CHF to the canton of Vaud.

How is municipal tax calculated?

Unlike the cantonal rate, which applies to all communes, the municipal tax rate varies from one commune to the other. 

In Lausanne, it is 78.5% for the 2023 tax return.

Which means:

• In example 1: I owe 3’437 CHF * 78.5% = 2’698 CHF in taxes to my commune. In total, I therefore owe 8’025.35 CHF in taxes to which I still have to add the federal tax.
• In example 2: We owe 7’874.05 CHF * 78.5% = 6’181 CHF in taxes to the commune. Which makes a total of 18’383.77 CHF in ICC taxes. 

Here is how we calculate, from A to Z, the annual tax at the cantonal and communal level, with the family quotient.

Before moving on to the final stage, it is important to highlight the variations in tax rates between the various communes in the canton of Vaud.

Vaud municipalities with the lowest tax rates in 2024

• Coinsins: Communal rate of 49% (up from 51% in 2023)
• Genolier: Communal rate of 52%.
• Dully: Communal rate of 53%
• Lutry: Communal rate of 54%.

Vaud municipalities with the highest tax rates in 2024

• Rossinière: Communal rate of 81%.
• Saubraz : Communal rate of 80%.
• Château d’Ôex and Tartegnin: Communal rate of 79%
• Lausanne: Communal rate of 78.5%
• Renens : Communal rate of 77%

To illustrate the difference in tax rates, let’s consider the example of a single person deciding whether to set up home in the commune of Coinsins or in Rossinière. Here’s the calculation:

• Communal tax in Coinsins: Basic tax CHF 3,437 multiplied by 49% = CHF 1,684.13
• Rossinière municipal tax: Basic tax CHF 3,437 multiplied by 81% = CHF 2,783.97

The difference in cost between these two communes is more than 65%, highlighting the significant impact of the commune’s choice on the tax burden.

End of parenthesis, let’s move on to the last stage.

Step 6: Calculate your total cantonal and municipal tax (ICC)

We’re nearing the end of this article. Now that we’ve worked out the cantonal and communal taxes, all you have to do is add them up to find out what you have to pay to the canton of Vaud.

However, there is some bad news at the end of this article: in addition to this tax, Switzerland and the Confederation also reserve the right to levy a tax on your income. Another complication is that the Confederation does not apply the same rules for deductions, family quotient and tax calculation. To establish your precise annual tax burden, you will therefore also need to take the time to calculate direct federal tax.

Reliable external links and resources

• General instructions for 2023 tax returns in the canton of Vaud
• Vaud cantonal tax schedule for 2023
• Vaud municipal tax scale for 2024

How can FBKConseils help you with your taxes in the canton of Vaud?

FBKConseils is a company specialising in financial advice for private individuals and self-employed professionals in Switzerland, with particular expertise in taxation. We are delighted to offer you the following services:

Delegating your tax return

We can help you manage your tax return from A to Z. All you have to do is provide us with your documents and we’ll take care of everything: from receiving and entering the information, answering your questions, and finally forwarding your return to the tax authorities. We also offer a follow-up service once your tax ruling has been received, to ensure that everything is in order.

Tax return training

For the past two years, FBKConseils has been offering training sessions in our Lausanne offices to teach you everything there is to know about tax returns. This service allows you to get personalised answers to your questions and to create a reliable example that can be used as a reference for years to come.

Challenging a taxation decision

Sometimes certain deductions are not accepted or the tax authorities dispute your return. FBKConseils can help you understand the decision and assist you in drawing up a dispute, ensuring that your rights are fully exercised.

Simulations of changes in situation and advance payment adjustments

We also offer a simulation service for any change in your personal situation, whether it’s a wedding, a birth, a property purchase, a move or a change in salary. By simulating the tax impact in advance, you can better plan your budget and explore tax optimisation strategies.