Publié le 01 March 2022

How to deduct your home savings plans?

How to reduce the amount of your taxes? This is the same question that everyone asks... In Luxembourg, you can use several investments, such as the old age pension plan, but also the home savings plan.
Indeed, this type of savings is deductible on your Luxembourg tax return. Moreover, it can be used to benefit from a state guarantee for your first acquisition.
However, certain conditions must be met in order to maintain the deductibility of the premiums paid. In addition, the deductibility of premiums is subject to a ceiling. 
So how to find your way around? We tell you everything!

What type of plan is deductible?

To be able to deduct the premiums of a home savings plan on your tax return, it is imperative that the home savings plan is subscribed in Luxembourg. Foreign savings plans (French, Belgian or German for example) are not deductible.
If the plan is subscribed within a specific Luxembourg home savings company, then two conditions must be respected to keep the deductibility of the premiums:
1.     Do not terminate the contract during the first 10 years after the contract is signed
Cancelling your contract within ten years of purchase removes the deductibility of previously deducted premiums.
Emma subscribes to a home savings plan in Luxembourg in 2015. From this year on, she deducts the premiums paid on her tax return. In 2021, she cancels her contract and gets the funds back. The termination of the contract within 10 years of the subscription will result in an amending tax assessment to Emma's disadvantage, i.e. Emma will have to pay the tax authorities the amount of tax saved in the years in which she deducted the previous premiums.
2.     Use the funds in the home savings plan for tax-deductible purposes
Since 2017, funds in a home savings plan must be used for tax-deductible purposes: these funds must be used to finance the subscriber's personal home. They can finance, for example:

  • The acquisition of the Subscriber's main residence
  • Repayment of the mortgage that finances the subscriber's main residence
  • Work, renovations in the subscriber's main residence: painting, boiler, windows, roof, bathroom... these works must be considered as important maintenance and repair expenses.
Therefore, it is no longer possible to use funds from a home savings plan to finance the purchase of a new car, for example.

What is the applicable ceiling?

The ceiling for deductibility of premiums is determined according to the age of the subscriber of the contract. The ceiling is in general 672 euros per year and per person belonging to the taxpayer's household.
If the subscriber is less than 41 years old at the beginning of the tax year, this ceiling is doubled to 1 344 euros.
Example: John and Eva are married and have a child. They are both under 41 years old. 
Deduction ceiling = 1 344 x 3 = 4 032 euros

How can I take advantage of a government guarantee thanks to a home savings plan?

Under certain conditions, the State can help guarantee a real estate loan. This is an important argument for the banks. To benefit from such a guarantee, you must prove that you have made payments of at least 290€ euros per year for a period of at least 3 years.
To deduct your home savings on your Luxembourg tax return, nothing could be easier than using!


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