Posted on 07 May 2025

Maximize your tax savings: What you can deduct in Luxembourg

Maximize your tax return in Luxembourg. Discover which expenses you can deduct, from housing and loans to donations and work-related costs.

What can I deduct from taxes?

In Luxembourg, tax deductions allow you to subtract certain expenses from your taxable income, thereby reducing your overall tax burden or maximizing your tax refund. These deductible expenses are categorized mainly into acquisition fees, special expenses, extraordinary expenses, and deductions related to homeownership and rental income.

Special expenses

These have a standard maximum deduction of €672 per household member and cover a range of expenditures, such as:

Debit interest on consumer loans
Insurance contributions and premiums, including:
- Car insurance (third-party liability and driver protection)
- Home insurance (third-party liability)
- Supplementary health insurance (CMCM, DKV...)
- Life insurance
Housing savings plans (BHW, Wüstenrot) (per household member):
- Up to €1,344 for subscribers aged 18-41
- Up to €672 for those over 41
Old-age pension contributions (up to €3,200 per taxpayer)
Donations (minimum total of €120)

Summary: Special expenses include insurance contributions, consumer loan interest, housing savings, pension contributions, and donations.

Deductions for Homeowners

If you are a homeowner, you can benefit from specific tax deductions, including:

Mortgage interest payments on your primary residence

Note: Notary fees and bank commissions related to the acquisition are also deductible in the year of purchase.

Summary: Homeowners can deduct mortgage interest payments on their primary residence.

Deductions for Landlords

Owning and renting out property in Luxembourg comes with tax advantages. If you earn rental income, you can deduct:

Property management fees, repairs, and maintenance costs
Mortgage interest on rental properties
Property depreciation to offset taxable income

Summary: Landlords can deduct expenses such as property management fees, maintenance costs, mortgage interest, and depreciation.

Acquisition fees

These are work-related expenses, with a standard minimum deduction of €540. If you are a professional, you may have certain expenses related to your work that qualify for deductions. For example:

Contributions to professional chambers and unions (e.g. LCGB, OGBL)
Books used exclusively for professional purposes
Professional clothing and work tools
Continuing education expenses, if required by your employer

Summary: Work-related expenses, including professional chamber fees, books, work tools, professional clothing, and mandatory education expenses, can be deducted.

Extraordinary expenses

These are unavoidable expenses that significantly impact your financial capacity. Examples include:

Medical expenses not reimbursed by CNS or supplementary health insurance
Divorce-related costs
Civil court costs
Funeral expenses
Financial maintenance for dependents
Doctor-prescribed dietary plans

Summary: Unexpected expenses like medical costs, divorce fees, funeral expenses, dependent maintenance, and prescribed dietary plans may qualify for deductions.

How does tax deduction work?

Tax deductions are applied through your annual tax return. By reporting your income and eligible expenses, the Luxembourg tax authorities calculate your taxable income and determine your tax liability. If you overpaid, you'll receive a refund; if underpaid, you'll need to settle the difference.

Summary: Tax deductions reduce taxable income and are applied through the annual tax return process, determining refunds or additional payments owed.

What should I consider when deducting expenses from taxes?

To maximize your tax benefits, consider the following:

Keep thorough records and documentation for all deductible expenses
Stay informed about changes in tax laws
Seek professional assistance (tax preparation services like taxx.lu) to ensure compliance
Or better yet, use taxx.lu for a simple, up-to-date, compliant, and tax-optimized online experience!

Summary: Keep thorough documentation, stay updated on tax laws, and seek professional assistance to maximize deductions.

Final thoughts

By understanding and applying these deductions, you can effectively reduce your taxable income and optimize your tax situation in Luxembourg. Taking the time to review your eligible deductions and keeping accurate records will help you make the most of available tax benefits.
Make your life easier with taxx.lu. Our step-by-step tax return process guides you through all possible deductions, just complete all necessary information and documents.

Disclaimer

All tax deductions mentioned in this blog post are subject to approval by the Luxembourg tax authorities. The acceptance of any deduction depends on individual circumstances and compliance with tax regulations.

Need help or assistance ? Our support team is always ready to help you via chat or per email at help@taxx.lu.