Personal tax deductions in Luxembourg 2026: what you can claim and save

Last reviewed: November 2026 · Reviewed by Stéphane Gombauld, tax expert, technologist and digital nomad

You pay tax in Luxembourg, through payroll or as a freelancer, and suspect you're leaving money on the table. This guide lists the 2026 deductions, allowances and credits, what each is worth and who can claim them.

Luxembourg personal deductions and benefits in 2026: the key figures

What changed for 2026

• Pension deduction up 41%. One of the L.I.R. amending laws of 19 December 2025 (ACD list of 2025 laws) raises the art. 111bis ceiling from EUR 3,200 to EUR 4,500 a year, from tax year 2026.
• New "stay in work" allowance. From 2026, employees who could take early retirement but keep working get an allowance of up to EUR 750 a month, EUR 9,000 a year (art. 129g L.I.R.).
• New start-up tax credit. From tax year 2026, art. 154quaterdecies L.I.R. gives a credit of 20% of a qualifying investment in an innovative start-up, capped at EUR 100,000 a year.
• More may come for 2026. Bill No. 8775, from the tripartite agreement of 8 June 2026, raises the higher home-savings ceiling, drops its age-40 limit and brings back a 2026 cost-of-living tax credit. The Chamber held its first vote on 28 October 2026 (ACD newsletter); check the published amounts before you file.
• The tax scale is unchanged from 2025. The ACD confirms the last adaptation took effect on 1 January 2025; the top 42% band still starts above EUR 234,870 (ACD tax scale).

Is this guide for you?

Read on if you…

• are a Luxembourg resident employee, freelancer or founder;
• are a couple deciding whether joint taxation pays off;
• want to know which savings products actually cut your 2026 bill.

Probably not your case if you…

• are a cross-border worker who doesn't qualify for, or hasn't chosen, resident-equivalent treatment;
• are looking for business expense rules for a company (see legal forms of business in Luxembourg).

How does your tax class change what you pay?

Your tax class decides how the scale is applied before any deduction. Art. 119 L.I.R. sets three classes.

Class 2 is the most favourable class for most couples. Married couples and registered partners who are taxed jointly also get the extra-professional allowance (abattement extra-professionnel) of EUR 4,500 when both earn professional income (art. 129b L.I.R.).

Bill No. 8676 would replace the three classes with a single class from tax year 2028. It isn't law yet, so 2026 still uses classes 1, 1a and 2.

Here's the catch for non-residents. You only get resident-style rates and deductions if at least 90% of your worldwide income is taxable in Luxembourg, or your income not taxable there is below EUR 13,000 (Guichet.lu, art. 157ter L.I.R.). Belgian residents also qualify if 50% of the household's professional income is taxable in Luxembourg. Our guide to Luxembourg tax residency explains how residence is decided.

Which deductions can you claim in 2026?

Deductible private costs are special expenses (dépenses spéciales), taken off total net income within these ceilings.

Retirement savings

• Private pension contract (art. 111bis): up to EUR 4,500 a year from 2026. The contract must pay out after at least 10 years, no earlier than age 60 and no later than age 75.
• Employer pension plan, your own contributions (art. 110 n° 3): up to EUR 1,200 a year.
• Self-employed supplementary pension (art. 110 n° 3a): contributions to an approved plan are deductible up to 20% of the relevant net income.

Insurance, loans and home savings

• Insurance premiums and consumer-loan interest: one combined ceiling of EUR 672 a year. It rises by EUR 672 for a jointly taxed spouse and for each child giving a child tax reduction. A couple with two children can deduct up to EUR 2,688.
• Home-savings contributions: EUR 1,344 a year if the youngest adult subscriber is 18 to 40 at the start of the year. Otherwise EUR 672, with the same uplift per spouse and child.

Mortgage interest on your main home

This is not a special expense. It's a cost against your (zero) rental value, so it's claimed on the property page of your return. Before you move in, interest is fully deductible. From the year you occupy the home, Guichet.lu sets these yearly ceilings per household member:

1. EUR 2,000 in the year of occupation and the following five years;
2. EUR 1,500 for the next five years;
3. EUR 1,000 after that.

A couple with two children in a new home can therefore deduct up to EUR 8,000 a year. Interest on a second home is in principle not deductible.

Family, care and donations

• Childcare, domestic help and care: a flat EUR 5,400 a year, EUR 450 a month, limited to costs you actually pay. Childcare must be in an approved structure and the child under 14 on 1 January.
• Children outside your household: up to EUR 5,424 a year per child you mainly support (art. 127bis L.I.R.).
• Donations: gifts to approved Luxembourg bodies and similar bodies in the EU or EFTA count if they total at least EUR 120 a year. The cap is 20% of total net income or EUR 1,000,000; the excess carries forward two years (ACD donations page).

Flat amounts you get anyway

If your real costs are lower, flat amounts apply. Employees get a minimum of EUR 540 for professional expenses (ACD). The special-expenses minimum is EUR 480 (art. 113 L.I.R.). It covers insurance, loan interest, home savings and pension contracts, so only the amount above EUR 480 is a real gain.

Which tax credits reduce your bill?

The start-up credit has strict conditions. The company must be registered in Luxembourg, be under five years old, employ at least two but fewer than 50 full-time equivalents and have turnover of at most EUR 10 million. At least 15% of its spending must go to R&D; law firms and real-estate companies are excluded. Your stake can't exceed 30% of its capital, you can't be a founder or employee, and you must hold the shares for three years.

Newly hired employees from abroad should also check the impatriate regime in our guide to tax incentives for expats and digital nomads in Luxembourg.

How do you claim, and what if you arrive mid-year?

1. Employees: payroll only applies flat amounts. File a return (form 100) or an annual adjustment to claim real costs and special expenses.
2. Keep evidence: annual bank statements for interest, insurer certificates, childcare invoices and donation receipts. The ACD can ask for them.
3. Arriving or leaving mid-year: ceilings for insurance, home savings and the EUR 480 minimum are prorated by full months of tax liability (art. 111 (6) and art. 113 L.I.R.).
4. Non-residents: you must qualify under art. 157ter and be assessed by return to claim these items.

Moving in? See how to obtain tax residency in Luxembourg. Comparing countries? See personal tax deductions in Malta and in Austria.

Common mistakes (and what they cost)

• Not filing a return as an employee → payroll applies only flat amounts, so a profile like Sofia's overpays about EUR 2,700 a year.
• Paying more than EUR 4,500 into a pension contract → the excess gives no deduction, and the money stays locked until at least age 60.
• Forgetting the EUR 480 minimum → you expect a saving on small insurance premiums that the flat amount already gave you.
• Claiming mortgage interest above the ceiling → the ACD cuts it back to EUR 2,000, 1,500 or 1,000 per household member and raises the bill.
• Giving less than EUR 120 in total → no donation deduction at all for the year.

Frequently asked questions

What is the standard deduction in Luxembourg?

There is no single standard deduction. Flat minimums apply instead if your real costs are lower: EUR 540 a year of professional expenses for employees and EUR 480 of special expenses under art. 113 L.I.R. The first band of the 2026 scale is also taxed at 0% up to EUR 13,230 of taxable income in class 1.

How much can I deduct for a private pension in Luxembourg in 2026?

Up to EUR 4,500 a year, up from EUR 3,200 in 2025, under art. 111bis (7) L.I.R. as amended by the law of 19 December 2025. The contract must run at least ten years and pay out between ages 60 and 75. Payouts follow special rules, so check them before you sign.

Is mortgage interest deductible in Luxembourg?

Yes, for your main home. Before you move in, interest is fully deductible. Afterwards, the ceiling per household member is EUR 2,000 for the first six years, EUR 1,500 for the next five, then EUR 1,000. Non-residents need resident-equivalent treatment to claim it.

Which tax class is best in Luxembourg?

Class 2, for couples taxed jointly, is usually the most favourable for a household. It also opens the EUR 4,500 extra-professional allowance when both partners work. Class 1a, mainly for single parents and widowed people, is more favourable than class 1. A single-class reform is planned from 2028.

Can non-residents claim Luxembourg tax deductions?

Yes, if they qualify for resident-equivalent treatment under art. 157ter L.I.R. At least 90% of worldwide income must be taxable in Luxembourg, or income not taxable there must be under EUR 13,000 (Belgian residents: 50% test). You must then file a return. Without that status, you're taxed with fewer personal deductions.

Are donations tax-deductible in Luxembourg?

Yes. Cash gifts to approved Luxembourg bodies, and to similar bodies in the EU or EFTA, are deductible when they total at least EUR 120 in the year. The deduction is capped at 20% of total net income or EUR 1,000,000. Amounts above the cap carry forward to the next two years.

Related guides

• Luxembourg tax residency rules
• Tax incentives for expats and digital nomads in Luxembourg
• Capital gains tax in Luxembourg
• Cryptocurrency taxes in Luxembourg
• Luxembourg tax landscape overview
• Personal tax deductions in Malta
• All country tax guides

Sources

• Legislation 2025: L.I.R. amending laws of 19 December 2025 – Administration des contributions directes
• Opting for resident treatment (tax assimilation) – Guichet.lu
• Newsletter of 30 October 2026 on Bill No. 8775 – Administration des contributions directes
• Luxembourg individual deductions and significant developments – PwC Worldwide Tax Summaries (secondary)
• Flat allowance for domestic help and childcare – Administration des contributions directes
• Donations – Administration des contributions directes
• Deducting mortgage interest on your main home – Guichet.lu
• Tax scale for individuals – Administration des contributions directes

This guide is general information, not personalised tax advice. See how we research and review.