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Filing a tax return is not mandatory for everyone in Luxembourg. However, it may be beneficial to submit one rather than relying solely on withholding tax. In this article, we explain everything you need to know.
When is filing a tax return mandatory?
- If your household income exceeds €100,000.
- If your household receives multiple sources of income and their total exceeds €36,000 for tax classes 1 and 2, or €30,000 for tax class 1A.
- If you receive income not subject to withholding tax (for example, rental income) amounting to more than €600.
- If the Administration des Contributions Directes specifically requests that you do so.
Tax-deductible expenses
If you submit a tax return, certain expenses may be deducted from your taxable income. Below is a non-exhaustive list of costs that can be tax-deductible in Luxembourg:
- Certain insurance premiums and interest payments (life insurance, health insurance, third-party liability insurance, interest on personal loans, credit cards, overdrafts, etc.). The maximum deduction is €672 per person.
- Interest on a mortgage for a primary residence. The ceiling depends on how long you have occupied the property: €4,000 for 1–5 years, €3,000 for 6–10 years, and €2,000 for more than 10 years.
- Supplementary pension savings contracts (old-age provision), with a maximum deduction of €3,200 per person in the household (excluding children).
- Home savings plans, with a maximum of €1,344 for individuals aged 18–40, and €672 for those over 40.
- Domestic service costs, care and assistance expenses related to dependency, as well as childcare costs, are tax-deductible up to €5,400 per year.
- Certain extraordinary expenses (costs related to divorce, funeral expenses, civil court fees, medically prescribed dietary regimes, etc.). If extraordinary expenses exceed €4,950, the difference may be deducted.
- Certain medical expenses not reimbursed by the CNS (hospital bills, medical treatments, prescription medication, dental and ophthalmological care, physiotherapy or specialised treatments, etc.).
Marital or partnership status
If you are married or in a registered partnership, declaring your income can be particularly advantageous. Until the planned tax reform in 2028, couples benefit from a specific tax calculation method that may be beneficial depending on their circumstances.
In this case, the taxable amount is calculated by adding together the income of both partners and dividing it by two. This system is especially advantageous when one partner earns significantly more than the other, as the couple may benefit from a lower tax bracket.
Should you file a tax return in Luxembourg?
Ultimately, it depends on your situation and personal choice. Even if the advantages mentioned above do not apply to you, it may still be wise to submit a tax return. Doing so helps avoid problems if the withholding tax has been miscalculated. If too much tax has been withheld, you may receive a refund. If too little has been withheld, filing a return helps prevent having to repay a large amount several years later. If your situation falls under the cases listed above, filing a tax return is strongly recommended.
In short, spending a little time completing your tax return is often worthwhile. It can help you avoid unpleasant surprises and ensure you do not miss out on significant tax advantages.
You now have the key information, the rest is up to you!
Also read: Filing your tax return in Luxembourg: the ultimate guide for employees