Investment with 1y horizon

I receive income non uniformly during the year and it happen that significant part I’ve received in January. So I put aside part of this income to pay taxes for 2025 but I will actually pay taxes in December. I wonder if someone had a similar dilemma of having an medium risk investment strategy where to put this money having in mind 1y investment horizon and what he/she has chosen (and why).

Given it’s not a full 365-day year that you need,
your only reasonable low-risk option is a savings account.
Otherwise you could look at short/mid term notes, but they need a full 1Y or even 2Y minimum afaik.

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To be honest I’d consider 1y investment horizon as suitable only for very-low risk investment.

If you don’t want to be exposed to the currency risk (you probably should not), that would mean that the max return you can expect is the CHF interest rate or slightly above, which is very little at the moment. You can look into savings account or bank mid term notes as @dbu suggested, but based on how much money we are talking about (and considering taxes) - it might not even justify your time doing it.

If your canton allows, one of the best investments is by the way indeed prepaying taxes (e.g. in ZH you get 1% interest and it is not taxed) - our of curiosity, why do you plan to prepay them only in December?

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because I thought that I should prepay taxes in December (except for AVS which ask me to pay in advance). If they give me 1% might be a decent return in comparison to other low-risk options.

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I think the best and a little unorthodox method is paying the tax in advance. You get more interest than with any other secure option.

I used do the reverse when I was still working: I did let the money in my stock portfolio and then paid only when I got the definitive tax. That is very fast lately, but I had to wait 9 years once. Stock market made me nice money in those 9 years with this “credit” with no collateral. Tax paid itself and there was even something left… :slight_smile:

You do not really owe anything until you get the definitive tax report from the taxman. Just ignore any temporary invoice.

They charge interest from October after the tax year. The interest is way lower than any credit without collateral but higher than any bank account.

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Yes one can do that, but I would only suggest it for people who would have no problems to pay the tax with their stable savings if necessary. If tax bill arrives in March you would have had a hard time in 2020 if you had to sell your tax-credit financed equity. :wink:

Please note that this differs between cantons. While e.g. ZH is very flexible and you can pay at any time until 30 days after the final tax bill, other cantons (e.g. AG) will enforce even provisional bills. And provisional federal tax bills have to be paid even in ZH.

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You can also just pay your taxes early. Depending on your canton, they might give you a reasonable interest rate.

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In fact the interest rate in ZH is even higher than the risk free rate, so it’s a pretty good deal.

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Thanks for the info, didn’t know that. Yes, it was Zurich, Kanton an Muni tax.

In ZH canton your expected tax payment balance for the year 202X for which the final cantonal+communal tax liability was (years) later confirmed to be Yk CHF will retroactively considered to be:

  • 0 until 30 September of 202X
  • Yk CHF from 1 October 202X

When your final tax bill arrives any amount over the expected balance will get extra 1% annual interest and any amount lower will incur 1% annual interest.

But the date (1st october) does not really matter if you are comparing prepaying taxes vs. other investments - getting interests on a loan you gave to the tax office or paying interests on a loan you got from a tax office is the same thing, ultimately it has 1% return (either directly or as an opportunity cost)

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It does matter a bit. We’re talking about a risk free return that’s 0.5% above the benchmark, not really going to be possible to beat without increasing the risk.

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I meant that it does not matter whether it is before 1st October or after, even if the choice technically switches from “loan money to tax office and earn interest?” to “repay my loan from tax office and stop paying interest?”

If you have a better investment that this 1% you can go for it regardless of the date, because you either earn more than what you would’ve earned by pre-paying or you earn more than the interests that you are paying on your tax debt

As much as I like the idea of “rounding up” the tax payment, there is one thing that is hard to predict: when will the authorities be done with your assessment.

If you’re lucky, you may get a final assessment on your 2025 taxes done before summer 2026. But if you hit some delays it could easily add a few months. I assume that a big change in income may trigger a review of your assessment and may cause some delays.

BTW, what about doing a provisional tax assessment, is this really needed? In ZH I can pre-pay as much as I like so it may be less relevant (excepted for the federal tax), but in other cantons where the pre-payments are strict, this could cause troubles (unless you are happy to actually over-pay and get the money back with some interest).

In my case the last approved tax declaration is from 2020. My tax advisor told me that it is sort of normal here.