Understanding the tax scale and tax classes in Luxembourg

Discover the tax scale and tax classes in Luxembourg and quickly calculate your tax with taxx.lu.

Filing your tax return may seem complex, but understanding the role of the tax scale and tax classes helps you better grasp how your tax is calculated in Luxembourg.

The role of the tax scale in your tax return

The tax scale determines the amount of income tax to be paid based on your net taxable income. It is progressive, meaning that the higher your income, the higher the tax rate. Each income bracket is taxed separately, which prevents excessive taxation on your total income.

Impact of tax class on the tax scale

In Luxembourg, there are three tax classes: 1, 1a, and 2. Each class corresponds to a specific tax scale that determines how your tax is calculated. Your tax class depends on your family situation, tax residence, and family responsibilities.

The different tax classes in Luxembourg

Class 1

This applies to single persons without dependent children, divorced persons, or married persons taxed individually.

Class 1a

This is assigned to single taxpayers with at least one dependent child, widowed persons, or persons aged 65 and over. This class benefits from a more favourable tax scale than class 1.

Class 2

This class applies to married or civil partnership couples taxed jointly. It generally offers the most advantageous tax regime thanks to the marital splitting mechanism.

How Luxembourg's progressive tax scale works

Luxembourg applies a system of income brackets with progressive marginal rates, ranging from 0% to 42%, plus the contribution to the Employment Fund.

Annual taxable income	Marginal tax rate
Up to 12,438€	0%
12,438€ – 14,508€	8%
14,508€ – 16,578€	9%
16,578€ – 18,648€	10%
18,648€ – 20,718€	11%
20,718€ – 22,788€	12%
22,788€ – 24,939€	14%
24,939€ – 27,090€	16%
27,090€ – 29,241€	18%
29,241€ – 31,392€	20%
31,392€ – 33,543€	22%
33,543€ – 35,694€	24%
35,694€ – 37,845€	26%
37,845€ – 39,996€	28%
39,996€ – 42,147€	30%
42,147€ – 44,298€	32%
44,298€ – 46,449€	34%
46,449€ – 48,600€	36%
48,600€ – 50,751€	38%
50,751€ – 110,403€	39%
110,403€ – 165,600€	40%
165,600€ – 220,788€	41%
Above 220,788€	42%

Calculation example

A taxpayer with an annual income of 30,000€ does not pay 20% on their entire income, but only on the portion corresponding to the 29,241€ – 31,392€ bracket:

Income bracket	Bracket amount	Rate	Tax
Up to 12,438€	-	0%	0€
12,438€ – 14,508€	2,070€	8%	165.60€
14,508€ – 16,578€	2,070€	9%	186.30€
16,578€ – 18,648€	2,070€	10%	207.00€
18,648€ – 20,718€	2,070€	11%	227.70€
20,718€ – 22,788€	2,070€	12%	248.40€
22,788€ – 24,939€	2,151€	14%	301.14€
24,939€ – 27,090€	2,151€	16%	344.16€
27,090€ – 29,241€	2,151€	18%	386.58€
29,241€ – 30,000€	759€	20%	151.80€

Total tax: 2,218.68€

This amount is significantly lower than what would result from applying the marginal rate to the entire income (6,000€).

Marginal rate vs. average rate

Marginal rate: The percentage applied to the last income bracket. In our example, the marginal rate is 20%.

Average rate: The average percentage paid on total income, here 7.4% (2,218.68€ ÷ 30,000€).

Contribution to the Employment Fund

Personal income tax is increased by a contribution to the Employment Fund, intended to finance employment support and professional integration measures. This contribution is calculated as a percentage of the income tax due:

• 7% for an adjusted taxable income of up to 150,000€ in tax classes 1 and 1a, or up to 300,000€ in tax class 2.
• 9% for an adjusted taxable income above these thresholds.