Every deduction a Luxembourg taxpayer can claim in 2026, and what each one is worth

The single biggest change to Luxembourg's deduction ceilings this year is easy to miss: the private pension plan allowance rose from €3,200 to €4,500 with effect from tax year 2026. For a taxpayer at a 42% marginal rate, using the new ceiling in full is worth around €1,890 in tax.

Most of the other ceilings are unchanged, and most taxpayers leave several of them untouched. What follows is the full list as it stands under the income tax law in force on 1 January 2026, with the exact figures.

The two standard deductions you get automatically

• Employment expenses (frais d'obtention): €540 a year. Granted to every employee under article 107 without proof. Where jointly taxed spouses both have employment income, each receives it. If your real professional expenses exceed €540, claim the actual amount instead — but you must document it.
• Special expenses (dépenses spéciales): a €480 minimum. Under article 113 this is generally €960 where jointly taxed spouses both receive employment income, subject to the statutory limitation concerning the lower-paid spouse. It applies automatically, and is replaced by your actual special expenses once they exceed it — which, for most people with a loan or an insurance policy, they quickly do.

Commuting: €99 a unit, capped at €2,574

The flat-rate travel allowance under article 105bis works in distance units, not kilometres of receipts:

• Each eligible distance unit is worth €99.
• The first four units are excluded — short commutes get nothing.
• The maximum is 26 eligible units, giving €2,574 a year.

The allowance is granted on the distance between your commune of residence and your place of work, and it is capped regardless of how far beyond 30 units you actually travel. For cross-border commuters this is often the largest single deduction available.

Insurance and loan interest: one shared €672

This is the most misunderstood ceiling in the Luxembourg system. Under article 109, qualifying insurance premiums and interest on private and personal loans share one combined ceiling of €672 per person per year — not €672 for each category. It then increases:

• Plus €672 for a jointly taxed spouse or partner.
• Plus €672 for each child qualifying for the child tax moderation.

A couple with two children therefore has €2,688 of combined capacity for premiums and consumer-loan interest together. Under Bill 8676 this ceiling is set to rise to €900 per household member from 2028.

Home savings: €672, or €1,344 if you are under 41

Contributions to a home-savings contract are deductible under article 111(5) up to €672 a year, doubled to €1,344 where the adult subscriber is aged 18 to 40 at the beginning of the tax year. Two details are worth knowing: the higher ceiling still applies during the calendar year in which the subscriber turns 41, and the applicable ceiling may be multiplied for a jointly taxed spouse and qualifying children.

Pension saving: the ceiling that moved

• Private pension plan (prévoyance-vieillesse, article 111bis): €4,500 a year from tax year 2026, up from €3,200 which applied from 2017 to 2025. The figure no longer varies with age — that ended in 2016. Spouses each calculate their own deduction on their own contract.
• Employee contributions to an employer's supplementary pension scheme: €1,200 a year under article 110(3).

The private pension plan carries conditions: the contract must run for at least ten years and cannot pay out before age 60. On payout, an annuity is 50% exempt with the remainder taxed as pension income, while a lump sum is taxed as extraordinary income at the half-global-rate.

The mortgage interest scale, in full

Interest on a loan for your own home is deductible on a schedule that steps down over time. According to the tax administration's guidance on owner-occupied dwellings, the ceilings per household member are:

• Before the home is available for occupation: qualifying interest is fully deductible.
• The year the rental value is fixed, and the following year: fully deductible.
• The second year after that, and the next three years: €4,000 a year.
• The following five years: €3,000 a year.
• All subsequent years: €2,000 a year.

Each ceiling is increased by the same amount for a jointly taxed spouse or partner and for each qualifying child — so a couple with two children in the first band has €16,000 of capacity. The clock runs from the year the rental value is fixed, not from the month you moved in.

Family and household

• Domestic help, childcare and dependency care: €5,400 a year, equivalent to €450 a month. This is a single combined ceiling covering all three categories, and it cannot exceed what you actually spent.
• A child not part of your household: €5,424 per child per year, limited to actual maintenance, education or study expenditure. This amount applies from tax year 2025.
• The extra-professional allowance: €4,500 for jointly taxed spouses who both have professional income, under article 129b. Under individual taxation the corresponding figure is €2,250 per qualifying spouse.

The credits, which work differently

Credits reduce the tax itself rather than taxable income, and are generally applied through payroll. The main ones are the employee credit and the pensioner credit, each varying between €0 and €600 by income; the single-parent credit, between €750 and €3,504; the CO2 credit of up to €216 a year; and the minimum social wage credit of €81 a month for monthly salaries between €1,800 and €3,000, tapering to zero at €3,600 under the formula 81/600 × (3,600 − gross monthly salary).

Four things people wrongly believe they can deduct

• The first four distance units of your commute. They are excluded outright, which is why an employee living and working in the same commune usually gets nothing from the travel allowance at all.
• Repairs and maintenance on the home you live in. Only the loan interest is deductible, within the degressive ceilings above. Work on your own home is relieved through the 3% super-reduced VAT mechanism instead, not through the income tax return.
• Anything above a ceiling. Contributions exceeding a ceiling do not carry forward to the following year — they simply lapse. Paying €6,000 into a private pension plan in one year and nothing the next wastes €1,500 of capacity that could have been used.
• Spending in the wrong calendar year. Deductions follow the year of actual payment. A premium settled on 2 January belongs to the new year, which makes late December a meaningful deadline for anyone with unused capacity.

The opposite error is more expensive. Interest on a loan financing a rented property is not caught by the €672 ceiling at all: it is deducted in full against the rental income it produces. Landlords who file that interest under special expenses instead of against their rental income routinely under-claim by thousands.

What this is actually worth

A deduction saves tax at your marginal rate, not your average one. For someone in the 42% band, €1,000 of deduction is €420 of tax. For someone at 20%, it is €200. That asymmetry is why the same advice is worth far more to higher earners — and why the reform's doubled tax-free allowance, which works from the bottom up, changes the arithmetic for everyone else.

Take a couple with two children, both working, at a marginal 39%: €4,500 of private pension saving each, €2,688 of shared insurance and loan capacity, the €4,500 extra-professional allowance, and €2,574 of commuting between them adds up to well over €18,000 of deductions — around €7,000 of tax.

Our guides to filing the return and the tax classes explain where these entries go, and the tax card determines how much is withheld in the meantime.