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How to cut your Luxembourg tax bill: every deduction worth knowing
Special expenses, mortgage interest, extraordinary charges: every Luxembourg tax deduction worth knowing in 2026. Average refund: €2,352.
Filing your Luxembourg tax return has never been anyone's idea of a good evening. Fair enough.
But somewhere between special expenses, mortgage interest, childcare costs and extraordinary charges, there's usually a few thousand euros sitting in boxes nobody ticked. Our clients get back €2,352 on average.
Here's what not to leave on the table.
1. Special expenses
The big one. This is where most of your optimisation lives. A minimum lump sum of €480 per taxpayer is applied automatically (taxx.lu handles it). Anything beyond that, you declare.
Insurance premiums and personal loan interest (up to €672 per household member, combined):
- Car: third-party liability and driver cover only
- Home: third-party liability only
- Supplementary health insurance (CMCM, DKV, etc.)
- Life, accident, disability or income protection insurance
- Outstanding balance insurance (annual premium)
- Interest paid on consumer loans or credit cards
Note
Outstanding balance insurance paid as a single premium works differently: a much higher cap applies (up to €6,000, plus age-related and child-related increases).
Building savings (épargne-logement): the cap depends on the age of the contract holder.
- Up to €1,344 per household member if the contract holder is aged 18 to 40 (inclusive) on 1 January of the tax year
- Up to €672 per household member if the contract holder is over 40
Note
Worth knowing: in a couple, it's the contract held by the younger spouse that sets the cap for the entire household. Example: Marc is 50, Sophie is 35. They have two children. If Sophie takes out the building savings contract, the cap rises to €1,344 × 4 = €5,376 for the household. If Marc does, you're back to €672 × 4 = €2,688.
Private pension plan (111bis): up to €4,500 per taxpayer for contributions made from January 2026.
Note
For the 2025 tax year, the 111bis cap stays at €3,200 per taxpayer.
Donations to approved charities: minimum €120 per donation, capped at 20% of net income (or €1,000,000).
2. Main residence: mortgage interest
If you're paying off a mortgage on your main home, the interest is deductible. The cap depends on the date the property was made available (not when you moved in):
- Available after 31/12/2023: full deduction, no cap
- Available between 01/01/2020 and 31/12/2023: €4,000 per household member
- Available between 01/01/2015 and 31/12/2019: €3,000 per household member
- Available before 01/01/2015: €2,000 per household member
In the year of purchase only, you can also deduct:
- Notary fees for opening the loan
- Bank commission fees
Note
Before the property is actually occupied (construction, renovation, not yet lived in), interest is fully deductible as work-related expenses, with no cap.
3. Childcare and home help: up to €5,400
Nursery, after-school care (maison relais), domestic staff, home assistance. All of these go into the same envelope, capped at €5,400 per year total for the household.
What counts:
- Nursery (crèche)
- Maison relais
- Declared domestic staff
- Care and assistance costs linked to a state of dependency
4. Extraordinary charges
For the exceptional expenses that genuinely hit your budget. Only deductible above a threshold calculated from your income and family situation.
Eligible costs include:
- Medical expenses not reimbursed by the CNS or supplementary insurance (pharmacy included)
- Divorce or civil litigation costs
- Funeral expenses
- Support for people unable to meet their own basic needs
- Medically prescribed dietary regimes
- Annuities and permanent obligations (in case of divorce)
Note
taxx.lu calculates and displays the threshold for you. Your job is to fill in the actual expenses: the more supporting documents you upload, the better.
5. Work-related expenses (lump sum: €540)
The category that rarely brings in big money, because the €540 lump sum is already applied automatically on your fiche de paie. But if your actual professional expenses go beyond that, it's worth declaring.
A few examples:
- Contributions to professional chambers and trade unions
- Books, subscriptions and journals used almost exclusively for work
- Specific work clothing
- Tools, instruments and professional equipment
- Continuing education required for your role
- A home office used essentially for professional purposes: typically the case for teachers, who usually don't have a dedicated workspace in their school (lesson prep, marking, etc.)
Caution
Commuting expenses do not go here. They're already factored into your fiche de paie.
6. Allowances
A few allowances reduce your taxable income directly:
- Abattement extra-professionnel: up to €4,500 per year for jointly-taxed couples where both spouses work
- Allowance for children outside the household, in cases of separation, divorce, shared custody, or alimony paid (up to €5,424 per child per year for the 2025 tax year)
Tip
taxx.lu applies the abattement extra-professionnel automatically if you qualify. For the allowance for children outside the household, you just need to enter the actual costs you've incurred: taxx.lu handles the rest.
The bottom line
There are a lot of deductions. Some are hidden. Some are oddly named. Working through them properly can mean several thousand euros back in your pocket. It's not complicated. It's just tedious.
Tip
With taxx.lu, your tax return gets filed online in a few minutes. AutoScan reads your documents and pre-fills what it can. Our Opti-Score suggests the moves to make for next year. You stay in control, we handle the paperwork.
4.9/5 on Google. €2,352 average refund.
