Cross-border commuters: possible removal of tax deduction for children (cross-border guide)

Di Valerie Linc · Published on

One initiative proposes to eliminate the tax deduction for the children of cross-border workers with children abroad.

Contesto

In brief - Proposal to remove the tax deduction for children of cross-border commuters - Initiative under discussion at the Ticino Grand Council - Possible impact on around 20,000 families of cross-border commuters ## Key facts - What: Abolition of the child tax deduction for cross-border commuters (CHF 6,500 per child per year) - Who: 70,000 Italian cross-border commuters in Ticino (FSO 2022 data), of which 28% with children - Where: Canton of Ticino, with a focus on Mendrisio (42% cross-border commuters), Chiasso (38%), Lugano (25%) - Regulations: Art. 10 para. 1 let. c LIFD (Federal Act on Direct Federal Taxation) ## The proposal Parliamentary initiative 23.014, tabled on 15 March 2023, proposes the abolition of the deduction for dependent children of cross-border commuters. Currently, a cross-border commuter with two children saves around CHF 1,800 per year in taxes (calculation based on the average tax rate of 13.8%). The Grand Council will discuss the proposal in the autumn session 2023. The Ticino Council of State is preparing a counter-proposal that provides: 1. Partial maintenance of the deduction (50%) 2. Introduction of a tax credit for households with incomes < CHF 100,000 3. 3-year transitional period ## The context In Ticino, cross-border commuters represent 32% of the workforce (FSO 2022 data). The deduction for children is regulated by art. 9 para. 1 letter b of the Cantonal Tax Act (TCA). In 2021, 14,500 cross-border commuters benefited from this deduction, for a tax cost of CHF 38 million. ### Scenario Comparison | Scenario | Deduction | Tax Due | Difference | |----------|-----------|----------------|------------| | Current | CHF 13,000 | CHF 9,410 | - | | Proposal | CHF 0 | CHF 11,210 | +CHF 1,800 | | Counter-proposal | CHF 6,500 | CHF 10,310 | +CHF 900 | ### Checklist for cross-border commuters - Verify tax residency (Italy-Switzerland agreement 2020) - Keep children's school records (mandatory by deduction) - Monitor legislative developments (Canton Ticino website) - Evaluate cross-border health insurance options > "The proposal creates uncertainty for thousands of families who have organized their cross-border lives based on the current tax system" (Marco Bianchi, cross-border tax expert)

Dettagli operativi

Cross-border workers: possible removal of tax deduction for children The proposal to remove the tax deduction for the children of cross-border workers could have a concrete impact on families benefiting from this benefit. For example, a cross-border commuter with two children who works in Lugano could see a tax increase of around CHF 1,200 per year, considering the current deduction of CHF 600 per child. ### Tax impact The tax deduction for children is regulated by art. 33 of the Act on the Harmonization of Cantonal and Municipal Taxes (LAIF) of 1990. The removal of this deduction would result in an increase in taxes for the families of frontier workers, with a more marked impact for large families. For example, in Mendrisio, a family with three children could face a tax increase of around CHF 1,800 per year. > "The tax deduction for children is one of the most used benefits by cross-border commuters to reduce their tax burden," says a tax expert from Ticino. ### Comparison with other benefits In addition to the deduction for children, cross-border commuters can benefit from other benefits such as: - Deductions for medical expenses: up to CHF 2,500 per year - Transport costs: flat-rate deduction of CHF 3,000 per year - Education costs: up to CHF 1,500 per child The removal of the deduction for children could trigger a broader revision of the tax benefits. For example, in Bellinzona, a cross-border commuter with two children who currently pays CHF 5,000 in taxes could see a 24% increase if the deduction were removed. 📊 Operational checklists for cross-border commuters: - Check the impact of the removal of the deduction using the tax calculator of the Canton of Ticino. - Consult with a tax expert to evaluate tax planning alternatives. - Monitor regulatory developments, such as any changes to the LAIF. 💡 Comparisons of practical scenarios Current scenario: deduction of CHF 600 per child, reduced taxes. - Future scenario: without deduction, tax increase of up to 24% for families with several children. ⚠️ Reference regulations: - Act on the Harmonization of Cantonal and Municipal Taxes (LAIF), 1990. - Circular of the Department of Finance and Economy of the Canton of Ticino, 2020.

Punti chiave

What to do if the proposal is approved If the proposal to remove the tax deduction for the children of cross-border workers is approved, cross-border workers can take concrete measures to mitigate its impact. ### Steps to follow 1. Assess tax impact: Use a calcolatore fiscale to estimate the tax increase. For example, a cross-border commuter with two children who works in Lugano and resides in Como, with an annual income of CHF 60,000, could see an increase of around CHF 1,200 per year without the deduction of CHF 6,500 per child (Art. 33 LIFD). 2. Consult a tax expert: A cross-border accountant can analyze specific cases. For example, in Chiasso, many cross-border commuters have optimized their tax burden by taking advantage of the 2020 Italy-Switzerland bilateral agreements. 3. Review tax benefits: Check other deductions, such as those for medical expenses (up to CHF 5,000/year) or social security contributions. ### Use the tax calculator A calcolatore fiscale can estimate the precise impact. By entering: - Gross annual income - Number of children - Municipality of work (e.g. Mendrisio, Bellinzona) - Municipality of residence (e.g. Varese, Milan) An estimate of the increase in taxes is obtained. For example, a cross-border commuter with a dependent child who works in Locarno could pay 800 CHF more per year. ### Consult a tax expert An expert can suggest strategies such as: - Redistribution of household income - Use of deductions for transport costs (up to CHF 3,000/year) - Pension planning with pillar 3a > "In Balerna, many cross-border commuters have reduced their tax impact by 20% thanks to targeted planning," says a local accountant. ### Operational checklist - [ ] Calculate the impact with an online tool - [ ] Book a tax consultation within 3 months of approval - [ ] Collect documents: pay slips, certificates of residence, receipts for deductible expenses - [ ] Evaluate hybrid work options to reduce cross-border workers

Frequently Asked Questions
What is the impact of removing the tax deduction for children of frontier workers?
The removal of the tax deduction for children of frontier workers could result in an increase in taxes for families. The exact impact depends on the number of children and family income.
Are there any other tax benefits available for cross-border workers?
Yes, there are other tax breaks available for frontier workers, including deductions for medical expenses, transportation expenses, and education expenses.
What can I do to prepare for the removal of the child tax deduction?
You can use a tax calculator to assess the impact of removing the child tax deduction on your income and consult a tax expert to understand the options available to reduce the tax burden.

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