The new €5,400 'Petite Enfance' allowance: What Parents need to know

Luxembourg introduces a new €5,400 annual allowance for each child under 3. Here's how it works and who qualifies.

Buried in Luxembourg's massive tax reform announcement is a brand new benefit specifically for parents of young children: the "abattement petite enfance."

Here's what you need to know.

What is it?

Starting in 2028, parents will be granted an allowance of €5,400 for each child under 3 years old. That works out to €450 per month per child. This is a completely new allowance that doesn't exist in the current system.

The government has budgeted €30 million for this measure in 2028, rising to €40 million in 2029 as awareness grows.

How much will I actually save?

Your actual tax savings depend on your marginal tax rate. As a rough guide:

• At a 30% marginal rate: €5,400 allowance = roughly €1,620 saved
• At a 40% marginal rate: €5,400 allowance = roughly €2,160 saved

For twins or multiple children under 3, multiply accordingly.

What about separated parents?

Good news: the allowance is shared between separated parents. Both can benefit from their portion of the deduction.

Why under 3?

The government chose this age limit because children become eligible for "éducation précoce" (early education) at age 3. The deduction is designed to support families during the most financially demanding early years, when childcare costs are highest and many parents reduce their working hours.

Don't confuse it with the childcare allowance

There's a separate flat-rate allowance for childcare costs, help, and dependency care that's also increasing, from €5,400 to €6,000. This is different from the petite enfance deduction. You may be able to claim both if you have young children and childcare expenses.

New: Protect your spouse's pension too

Another new measure for families: if one parent reduces or stops working to care for children, the other can now deduct contributions to voluntary pension insurance for their spouse. This helps protect pension rights for stay-at-home parents or those working part-time.

This is just one piece of the puzzle

The petite enfance deduction comes alongside several other family-focused measures:

• Chèque-service accueil (CSA) reform: Up to €5,000+ savings per family per year. The State will cover two-thirds of childcare costs, billing will be based on actual hours used (no more packages or supplements), and a place is guaranteed for every child by 2030.
• 20 free hours per week with assistants parentaux extended to children aged 1-4
• Family allowance increases (expected in 2027): +€45/month for under 12s, +€60/month for 12+
• New targeted aid up to €3,000/year for lower-income families with school-age children
• Birth bonus increased to €2,329.12 total (4 tranches of €580.03)

Add it all up, and families with young children are looking at substantial support.