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Rental income in Luxembourg: how it can actually lower your tax bill
Can rental income really lower your tax in Luxembourg? Yes, in some cases. We explain how the net is worked out, simply, on taxx.lu.
You rent out a property and you assume the whole rent will be taxed? Slow down. The State doesn't tax your gross rent. It taxes what's left once your costs are paid. And sometimes, what's left is less than zero.
When that happens, your overall tax bill goes down.
Gross or net: that's where it all turns
What the ACD (Luxembourg's tax authority, Administration des contributions directes) wants to know isn't how much your tenants pay you each month. It's what's left once all the costs of running the property are paid.
That's your net rental income.
The formula fits on one line:
Rent received − deductible expenses = net rental income
Whether that figure ends up positive or negative is what decides whether your tax goes up or down.
What you can deduct from your rent
Expenses directly tied to the rented property are deductible. Specifically:
- mortgage interest;
- maintenance and repair costs;
- building depreciation (the loss in value of the building over time, which the State lets you write off each year);
- property management and letting agent fees;
- insurance premiums on the property;
- property tax (impôt foncier);
- non-recoverable charges (the share of building service charges you can't pass on to the tenant).
Depreciation only applies to the building itself. The land doesn't lose value in the eyes of the tax office.
Maintenance isn't improvement
Repainting a wall, replacing a broken boiler, redoing a sealant: that's maintenance. You deduct the full amount in the year you pay.
Refitting an entire kitchen, adding a conservatory, extending the property: that's improvement. Those costs are deducted bit by bit, spread over several years through depreciation.
A worked example
You collect €18,000 in rent over the year.
You pay €12,000 in mortgage interest, €1,200 in maintenance and €800 in non-recoverable charges. You also deduct €3,000 of depreciation.
Rent: €18,000
Deductible expenses: €17,000
Net rental income: €1,000
It's that €1,000 that's added to your other income for the tax calculation. Not the €18,000.
When your rent lowers your tax
If your expenses come in higher than your rent, your net rental income goes negative.
That loss doesn't just sit in a corner. In Luxembourg, it offsets your other income (salary, pension, etc.). Your overall taxable income drops, and your tax with it.
This is very common in the first years of ownership, when mortgage interest is still high and the rent doesn't cover all the costs.
When your rent raises your tax
The other way round: if your expenses are lower than your rent, the net is positive.
That figure adds to your other income, and your tax climbs.
It tends to happen when:
- the mortgage is mostly or fully paid off;
- the rent is high but the running costs are low;
- you've owned the property a long time and most of the building is already depreciated.
Declaring isn't optional
Rental income has to be declared, whether it lowers or raises your tax. Skipping it means a reassessment and late-payment interest.
How to declare rental income in Luxembourg
Rental income is declared on form 190/210 of your tax return. Property by property, you list the rent collected and all the deductible expenses.
That's the annex that turns your gross rent into taxable net income.
Easier on taxx.lu
The 190/210 annex is available as an add-on (€59 extra) on all our plans. You fill in a guided form, and we handle the calculations and ACD-ready formatting. Several properties? Add them one by one, with no starting over.
In short
Positive net rental income raises your tax. Negative net rental income lowers it.
It all comes down to how the net is worked out. Keep every receipt. Tell maintenance and improvement apart. Don't miss a single deductible expense. A few hundred euros forgotten can be tens of euros too much in tax.
