Year-end tips for Luxembourg taxpayers

in Luxembourg, Tax, 19.12.2017

December is a month of mixed emotions. Holidays like St. Nicholas Day and Christmas bring a lot of cheer—but they also, well, they don’t cost nothing. Perhaps saving is on your mind. If so, I have a few suggestions for ways to save on your tax bill before the end of this month!

Watch the video above for four tax tips, or keep reading for additional tips.

Home savings and loan schemes

Contributions to qualifying home saving and loan schemes are deductible from your income. Any credit interest received from these schemes is fully tax-exempt. If on 1 January 2017 you were between 18 and 40 years old, your maximum deduction amounts to €1,344. If it was outside this range, you can still deduct up to €672. If you have a spouse / legal partner, this maximum deductible amount is doubled. For each child living in your household, you can add, again, the same amount.

Example: you’re married, you and your partner are 35, and you have two children living with you: your maximum deduction amounts to €5,376 (4x €1,344).

Occupational pension schemes

By making Luxembourg social security contributions, you are saving for your future pension benefits (first pillar). Additionally, many employers offer an occupational pension plan (second pillar). You can also pay into this pension scheme to save for your retirement; your personal contribution is deductible up to €1,200.

Voluntary pension schemes

Saving more for your future retirement is possible through a voluntary pension scheme (third pillar). Any contributions to a qualifying voluntary pension scheme are deductible up to €3,200. This maximum deduction is available for each spouse / legal partner. As of 2017, this maximum deduction no longer depends on your age.

Child care and domestic help

Costs for child care, household employees, and home assistance for the disabled may also be deductible. If your household help was hired by you, an intermediary company, or an association, and carries out domestic work mainly in your house, and is affiliated with the social security programme, then the maximum deduction for these combined expenses amounts to €450 per month (€5,400 per year).

Charity donations

Perhaps you’re thinking of giving to the less fortunate this December. If you donate more than €120 to qualifying charitable institutions, you can claim these donations as a tax deduction. The maximum deduction you can claim is 20% of your taxable income (with a cap of €1,000,000). A list of qualifying charitable institutions can be found here.

Insurance and debit interests

Subject to a maximum, both debit interest and insurance contributions may be deductible. Deductible debit interest includes interest paid on consumer loans, credit cards, or debit bank accounts. Deductible insurance premiums include premiums for life, death, accident, disability, sickness, or third-party liability insurance. As of 1 January 2017 there are no separate ceilings for the maximum allowed deduction of insurance contributions and debit interest (read more here). The overall ceiling amounts to €672. If you have a spouse / legal partner, this maximum deductible amount is doubled. For each child living in your household, you can add the same amount, similar to the deduction for home savings and loan schemes.

Don’t wait—calculate!

If you want to know what to expect for your 2017 or 2018 tax bill, check out our free tax calculator. With it, you can easily check what your expected taxes are and which deductions you could potentially benefit from. No information will be stored: it is safe, simple, and secure.

Or, browse the advice in our leaflet on individual taxation in Luxembourg.

I wish you happy holidays and a tax-optimised 2018!


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