Moving House after Retirement – Things to Consider
The kids have moved out, the family home has become too big. Upon retirement, many couples wish to move into a smaller home better suited to their advancing years. Prospective retirees should carefully inform themselves about the financial consequences they may experience when moving to another canton.
For Martha Senn, her large family home was increasingly becoming a burden. Her husband, Ernst, was often traveling for work. This meant that, in addition to working four days a week as a travel agent, she had to take care of the house largely by herself. After the youngest daughter had moved out, Martha had the idea of giving the house to the children and moving into a smaller apartment. Ernst said that he could definitely picture moving after his retirement in two years.
Affordable Condo, but Higher Taxes
During their very first search on the internet, the couple found a condo in a neighboring canton that they both really liked – especially the price. Mrs. Senn thought it was too good to be true and wanted to speak with an expert. A wise move, as it turned out. Their excitement at finding an affordable property would have likely dissipated as soon as they had received their next tax bill.
Tax Consultant Explains
The tax consultant strongly advised them not to let themselves be led by the affordable sale price. He showed them that moving to a canton with a lower tax rate would be financially more advantageous even if it would cost them 50% more to buy a property there. The amounts they could save when withdrawing their pension capital as well as in income and wealth taxes in the canton in his comparison would be so high that they would offset the difference in the sale price within just ten years. The meeting lasted less than an hour, but it was decisive to Martha and Ernst Senn's future. Today, they live in a lakeside canton with low tax rates, in a condo that is just as nice as the one that first caught their eye.
Five Things to Consider When Moving to Another Canton
- You are taxed in the location in which you live on December 31. If you move house in November, you will be subject to tax at your new place of residence and will pay taxes at the local rate for the entire calendar year.
- Persons subject to tax at source must inquire about their tax obligations at their new place of residence. The rules are different from canton to canton.
- Lump-sum withdrawals from a pension fund or Pillar 3a account are taxed on the due date or payment date.
- The testator's last place of residence is used in the assessment procedure for inheritance taxes. The same also applies to gift tax: The place of residence of the donor counts in the case of donations and advancements. The differences between cantons are significant. The highest tax rates apply in the cantons of Ticino, Schaffhausen, and St. Gallen; Schwyz has no inheritance tax.
- There is one exception in the case of gift and inheritance tax: Real estate is taxed in the canton in which it is located.