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Luxembourg tax rates, in plain English
Marginal rate, effective rate, tax classes: understand what actually shapes your tax bill in Luxembourg. File easily on taxx.lu.
23 tax brackets. Two rates everyone mixes up. Three tax classes that change everything. Here's what actually matters, without the jargon.
The system is progressive
The more you earn, the bigger the share that goes to the state. Not all at once: your income is sliced into brackets, and each bracket has its own rate.
In practice, your first few thousand euros aren't taxed at all. From there it climbs, bracket by bracket, until it hits a top marginal rate of 42%.
Marginal rate or effective rate? The two everyone mixes up
Marginal rate: the rate on your last euro earned. The rate of your top bracket.
Effective rate: the average rate you actually pay across your whole income. Always lower than the marginal.
Example: taxable income of €60,000, tax class 1
The quick math: €60,000 × 39% = €23,400 in tax.
Good news: it's wrong.
Your income isn't taxed in one go. It's sliced into brackets, and each one pays its own rate.
| Portion of income | Rate applied | Tax due |
|---|---|---|
| €0 – €13,230 | 0% | €0 |
| €13,230 – €22,050 | 8 to 11% | €838 |
| €22,050 – €38,025 | 12 to 24% | €2,881 |
| €38,025 – €54,090 | 26 to 38% | €5,141 |
| €54,090 – €60,000 | 39% (top bracket) | €2,305 |
| Total on €60,000 | effective ≈ 18.6% | ≈ €11,165 |
You pay €11,165, less than half of what the quick math suggests. Your first €13,230 isn't taxed at all. Your last €5,910 is, at 39%. Between the two, progressivity does its work.
The full 2025 scale
Here are the 23 official brackets that apply to tax class 1 for tax year 2025.
| Taxable income bracket | Marginal rate |
|---|---|
| Up to €13,230 | 0% |
| €13,230 – €15,435 | 8% |
| €15,435 – €17,640 | 9% |
| €17,640 – €19,845 | 10% |
| €19,845 – €22,050 | 11% |
| €22,050 – €24,255 | 12% |
| €24,255 – €26,550 | 14% |
| €26,550 – €28,845 | 16% |
| €28,845 – €31,140 | 18% |
| €31,140 – €33,435 | 20% |
| €33,435 – €35,730 | 22% |
| €35,730 – €38,025 | 24% |
| €38,025 – €40,320 | 26% |
| €40,320 – €42,615 | 28% |
| €42,615 – €44,910 | 30% |
| €44,910 – €47,205 | 32% |
| €47,205 – €49,500 | 34% |
| €49,500 – €51,795 | 36% |
| €51,795 – €54,090 | 38% |
| €54,090 – €117,450 | 39% |
| €117,450 – €176,160 | 40% |
| €176,160 – €234,870 | 41% |
| Over €234,870 | 42% |
This scale applies to class 1. Classes 1a and 2 use formulas derived from the same tariff (income splitting for class 2, a specific formula for 1a).
Source: Administration des contributions directes, scale in force on 1 January 2025.
The real ceiling isn't 42%
On top of the 42% marginal rate, you add the contribution to the employment fund (the solidarity tax):
- 7% for most taxpayers
- 9% above €150,000 of taxable income (classes 1 and 1a) or €300,000 (class 2)
Result for the highest earners: 42% × 1.09 = 45.78%.
Your tax class changes everything
Two people on the same salary can pay very different tax bills depending on their class:
- Class 1: single, divorced, separated
- Class 1a: single parent with a dependent child, widow(er) (within 3 years of bereavement), or anyone aged 65 or over on 1 January of the tax year
- Class 2: married couples, registered partners (under conditions)
Class 2 is usually the most favourable: the couple's combined income is split in half, then the scale applies to each half. The result is often a lower overall tax bill.
Bringing your effective rate down
Deductions reduce your taxable income, and so the final tax. The most common ones:
- insurance premiums (life, civil liability, top-up health)
- mortgage interest
- contributions to a 111bis pension plan (up to €4,500 from tax year 2026)
- childcare and household staff costs
- payments into a home savings plan
taxx.lu's Opti-Score
While you're filling in your return, taxx.lu spots the deductions worth optimising and suggests personalised tips for next year. A clear score, without having to read the tax code.
The takeaway
Luxembourg tax rates aren't a single number. They're a combination: brackets, class, deductions. The rate that ends up on your tax assessment depends more on your personal situation than on the scale itself.
