Main residence abroad: how to deduct your mortgage interest in Luxembourg

Cross-border worker with a mortgage in France, Belgium or Germany? Your interest is deductible in Luxembourg. Ceilings, mechanism and examples.

You work in Luxembourg but live across the border in France, Belgium or Germany. You're paying off a mortgage on your home. And every month, a chunk of that goes towards interest.

Here's the good news: you can deduct that interest in your Luxembourg tax return. It's one of the biggest tax breaks available to cross-border workers, and most people have no idea it exists.

Let's break it down.

How it works: negative rental income

Even though your home is outside Luxembourg, the interest on your mortgage counts in your Luxembourg tax return. It's classified as negative rental income.

What does that mean in practice? Your interest doesn't directly lower your taxable income in Luxembourg. Instead, it brings down your overall tax rate (the effective rate). A lower rate on your Luxembourg income means a lower tax bill. Simple as that.

This works differently from a property in Luxembourg, where interest reduces your taxable income directly. But the end result is the same: you pay less tax.

First things first: fiscal assimilation

To claim this deduction as a non-resident, you need to request fiscal assimilation in your tax return. Essentially, you're asking to be treated like a Luxembourg resident for tax purposes.

You only need to meet one of these conditions:

• French and German cross-border workers: at least 90% of your worldwide income is taxable in Luxembourg
• Belgian cross-border workers: more than 50% of your household's professional income is taxable in Luxembourg (or the 90% rule above)
• Everyone else: if your net income earned outside Luxembourg is under 13,000€, you qualify too, even if you don't hit the 90% mark

No assimilation, no deduction. But if you're eligible, it's almost always worth it.

How much can you deduct?

The maximum depends on the availability date of your property. That's when the home was ready to move into, even if you actually moved in later.

The ceilings apply per person in the tax household (you, your spouse, dependent children):

• Available after 31/12/2023: full deduction (no ceiling)
• Available between 31/12/2019 and 01/01/2024: 4,000€ per person
• Available between 31/12/2014 and 01/01/2020: 3,000€ per person
• Available before 01/01/2015: 2,000€ per person

These amounts stack. A couple with two kids? That's the ceiling times four.

Only interest is deductible. Repaying the principal doesn't count. One bonus: in the year you buy, notary fees for the loan agreement and bank commissions are deductible too.

Example: cross-border worker living in France

Thomas works in Luxembourg and lives in France with his partner and their child. They bought their home in 2021 (availability date) and paid 10,000€ in mortgage interest in 2025.

• Ceiling: 4,000€ per person (availability between 31/12/2019 and 01/01/2024)
• Household: 3 people → 4,000€ x 3 = 12,000€
• Interest paid: 10,000€

The interest (10,000€) is below the household ceiling (12,000€), so the full amount counts. It's declared as negative rental income and brings Thomas's tax rate down, cutting his final tax bill in Luxembourg.

If the interest had been higher, say 15,000€, only 12,000€ would have been taken into account.

What if my home were in Luxembourg?

For a property in Luxembourg, it's more straightforward. The interest reduces your taxable income directly, not just your tax rate. The same ceilings apply.

Example: residence in Luxembourg

Sophie and Marc have two children. They've lived in their Luxembourg home since 2020 (availability date). In 2025, their mortgage generates 14,000€ in interest.

• Ceiling: 4,000€ per person → 4,000€ x 4 = 16,000€
• Interest paid: 14,000€

The full 14,000€ comes straight off their taxable income, lowering their tax base and their tax bill.

The bottom line

• Your mortgage interest is deductible in Luxembourg, even if you live in France, Belgium or Germany
• For a property abroad, the deduction lowers your tax rate rather than your taxable income directly
• You need fiscal assimilation to claim it as a non-resident
• Ceilings range from 2,000€ to 4,000€ per person based on availability date, with no cap at all for recent purchases (after 2023)
• Only interest counts, not capital repayments