How to deduct the interests of its real estate loan?

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To build wealth and to develop it: this is the objective that many wish to reach during their life. The first step is often the acquisition of the main residence. This implies being able to finance the acquired property, but it also impacts your taxation.

You own your main residence and you are wondering if this has an impact on your tax return in Luxembourg? You don't know what you can deduct and under which conditions?

We explain it all to you!

If you have financed your real estate purchase with a loan, then you can deduct the interest expense in your Luxembourg tax return. To do so, you will simply have to provide the tax authorities with a certificate from your bank attesting to the interest you paid during the year.

The deduction ceiling varies according to two criteria:

The year you moved in
The composition of your household

The year you move in will determine the maximum deduction limit per person you can claim.

The first 5 years: 3 000 euros
Between 6 and 10 years: 2 250 euros
From 10 years: 1 500 euros

This ceiling is increased by its own amount for the spouse or for the jointly taxable partner, and for each child who was part of the taxpayer's household.

However, if you received an interest subsidy or grant, it must be reported and deducted from the amount of the deductible interest expense.

1. Patrick is married with 2 children. They moved into their new main residence in 2019, which they own. They paid 4,500 euros in interest in 2023.

Date of moving in: 2019 = the applicable ceiling is therefore 2 000 euros
Number of people in the household: 4 (2 adults and 2 children)
Maximum deduction limit: 4 x 3 000 = 12 000 euros
The interest of 4 500 euros is therefore fully deductible for the year 2023.

2. Mia is in a civil union and has one child. Together with her partner, they bought their main residence in 2009 and moved in the same year. In 2023, they paid 3,500 euros in interest and Mia received an interest subsidy of 1,000 euros.

Date of moving in: 2009 = the applicable ceiling is therefore 1 000 euros
Number of people in the household: 3 (2 adults and 1 child)
Maximum deduction limit: 3 x 1 500 = 4 500 euros
Deduction of the interest subsidy: 3 500 - 1 000 = 2 500 euros
Mia will be able to deduct 2 500 euros of interest on her home loan for the year 2023.

If you have taken out a loan to carry out work on your main residence, the interest on this loan is deductible as a special expense.

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