Understanding the calculation of the taxable income in the canton of Vaud

First of all, don’t worry, everything you make is not taxable and therefore taxed. In the land of Guillaume Tell, there are three levels of income: gross, net and taxable.

The only income on which you have to pay taxes is the… taxable income. 

But how can you determine it? This is what we will have a look at right now by identifying the differences between these three types of incomes.

What is the gross annual income made of?

It simply is the final sum of all your incomes throughout the year as well as your pensions and benefits related to your assets.

Some incomes are not subject to taxation. Those are not taken into account for the calculation.

Here is a table that sums up and differentiates taxable incomes from non-taxable incomes.

What income is subject to income tax and what income is exempt from income tax to determine taxable income

Did you calculate your gross income? Then let’s move on to the next step: the net income.

What is my annual net income made of and how can I determine it? 

Net income is simply your gross income minus social contributions.

If you are an employee, do you know exactly which social deductions are withheld on your gross salary.

It is the ones that are deducted at the end of each month by your employer. They appear on your pay slips.

If you are self-employed, you have to deduct them yourself.

Image summarising the transition from gross to net income by explaining all the social deductions made: AVS, LPP, AC, APG ANP, daily allowance, to determine the taxable income

In conclusion, what you receive on your bank account each month is your monthly net income.

Last step: taxable income.

What is my taxable income made of and how can I determine it at the cantonal and communal level ?

Take your net income, apply the deductions authorized by your commune and your canton and you will get your ICC taxable income.

The problem, is that when it comes to taxation, just like in a lot of other Swiss fields, communes and cantons have considerable room for manoeuvre.

The result: text calculations in Switzerland resembles a Chinese puzzle, an endless maze, an enigma worthy of a detective story. You pick one. 

Why does someone from Vaud a different taxes of someone from Geneva even though both work and live in the same country?

Worse… why does a pulliéran (person who lives in Pully, lucky him) pay different taxes as a payernois (person who lives in Payerne, these things happen) ?

Even worse… why does a married couple without children pay more taxes than an unmarried couple without children?

We will break it down and you will see it is not (that) complicated.

We just have to go step-by-step. One thing at a time.

Image summarising the transition from net income to taxable income by explaining all the private deductions that the taxpayer can make at cantonal, municipal and federal level to determine taxable income

In this article, we will only discuss the first level of the taxable income, the one of your commune and your canton.

The deductions possible vary from one canton to another. However, they are the same from one commune to another within the same canton. 

for example, if you live in Lausanne or in Fribourg, possible deductions will be different. Of course, there will be some similarities but they won’t be the exact same.

On the other hand, whether you live in the Lausanne or in Yverdon-les-Bains, possible deductions will be exactly the same.

The difference is taxation rates from on commune to another.

This is why, For the same income and the same status, you will pay a different final tax depending on whether you live in Moudon or in Nyon. Both are situated in the canton of Vaud, in case you skipped geography class. 

The difference is at the level of the commune. 

Do you want to find out about how your commune or your canton can modify your tax burden? Go check out this article about how to calculate taxes.

And if you want to estimate your taxes and find out about your taxable income, come try out our tax simulator!

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