Your first Luxembourg tax return: who has to file, and what is coming in 2028

Luxembourg deducts income tax at source through your payslip, which means a large number of employees never file a return at all and never think about it. That is fine until the year it is not: a second income arrives, a spouse starts work, you buy a property, or you discover that the deductions you were entitled to were never claimed. Understanding when filing is compulsory, and when it is merely profitable, is worth an afternoon.

The system as it stands today

Luxembourg personal income tax currently operates through three tax classes, and your class is printed on your withholding tax card.

• Class 1 applies to single taxpayers without children.
• Class 1a applies to single parents, widowed taxpayers and certain taxpayers aged 65 or over.
• Class 2 applies to married couples and registered partners taxed jointly, using the splitting method, under which the couple's combined income is divided equally between them for the purpose of calculating the rate.

Class 2 is usually the most favourable, because splitting reduces the effective rate for couples with unequal incomes. For 2026, income up to €13,230 is free of tax under class 1, the top rate of 42 per cent applies above €234,870, and an employment fund surcharge of 7 to 9 per cent sits on top of the calculated tax.

A first job always starts in class 1, and the card is updated when your situation changes. If you married, entered a partnership or had a child and did not tell the tax administration, you are probably in the wrong class.

The reform: a single tax class from 2028

On 6 January 2026 the government tabled draft bill 8676, which would replace classes 1, 1a and 2 with a single tax class and move to individual taxation as the default. The intended date of application is tax year 2028.

• A single scale for everyone, regardless of marital or family status, with each taxpayer assessed on their own income under a one-taxpayer, one-return approach.
• A much wider zero band, running to €26,650 under the proposed new scale compared with €13,230 under the current class 1.
• Individual taxation would become mandatory for taxpayers currently in classes 1 and 1a, and for couples who marry or enter a partnership after the reform takes effect.
• A 25-year transitional period, during which couples already taxed jointly before the reform may continue to benefit from the former class 2 tariff.

Two cautions. It remains a draft law, so the existing classes apply for 2026 and 2027, and a bill can change before it is voted. And while the reform is expected to be favourable for most taxpayers, couples with a large income disparity are the group most likely to prefer the transitional class 2 tariff. If that describes your household, this is worth a conversation with an adviser closer to the date rather than an assumption now.

Who must file, and who should

Filing is compulsory in a range of situations, and the detail is set out on guichet.lu. The circumstances that most commonly trigger it are these.

• Taxable income above the threshold for compulsory assessment.
• Income from more than one source, including a second employment or a pension alongside a salary.
• A household with two working spouses or partners taxed jointly.
• Significant income not subject to withholding, such as rental income or foreign income.
• Non-residents who have requested assimilation to resident status.

Even where filing is not compulsory it is frequently worthwhile, because a return is the mechanism through which deductions are claimed. The items that most often produce a refund for a new arrival:

• Mortgage interest on a Luxembourg home, within the applicable limits.
• Contributions to a personal pension plan and to a home savings scheme.
• Loan interest and certain insurance premiums, within the deductible ceilings.
• Commuting expenses, through the standard allowance.
• Childcare and domestic help costs, within limits.
• Removal costs in certain circumstances, which is directly relevant in a first year.

The practical mechanics

• The tax administration is the Administration des contributions directes, and returns are filed with your competent tax office or online through MyGuichet.
• The filing deadline moves, and extensions are possible in practice, but you should confirm the current date rather than rely on last year's. Late filing has consequences.
• Keep everything. Payslips, the annual salary certificate from your employer, bank interest statements, insurance certificates, mortgage statements, childcare invoices and receipts for anything you intend to deduct.
• The first return is the hard one. Once the structure of your file is established, subsequent years are largely a matter of updating figures.

For a household with a mortgage, foreign assets, stock-based compensation or a cross-border element, an accountant costs a few hundred euros and routinely finds more than that. For a single employee with one salary and no property, the return is straightforward enough to do yourself.

The documents to keep from month one

A tax return is easy when the file is complete and painful when it is not, and the difference is decided during the year rather than at the deadline.

• Every payslip, plus the annual salary certificate your employer issues.
• The withholding tax card and any amended version of it.
• Bank and investment statements, including foreign accounts, since these have reporting consequences.
• Mortgage statements showing interest paid, and the notarial deed.
• Insurance certificates for policies that may be deductible.
• Pension contribution statements for third-pillar products.
• Childcare and domestic help invoices, with proof of payment rather than just the invoice.
• Removal invoices from the year you arrived.

One folder, physical or digital, opened on your first day and added to as things arrive. It takes no time during the year and it removes an entire weekend of searching at filing time. It is also what an accountant will ask for, and a complete file costs less to have processed than a shoebox.

Three questions we are asked

I have been here two years and never filed. Is that a problem?

If filing was not compulsory in your situation, no. If it was, address it rather than waiting, because the position does not improve with time. In either case, check whether you were entitled to deductions you did not claim, since it may be possible to regularise earlier years.

Should my spouse and I be taxed jointly?

Under the current rules, joint taxation in class 2 is generally advantageous where incomes are unequal, and less so where they are similar. Married non-residents default to class 1 unless they request assimilation to resident status, which is a specific procedure with its own conditions. This is precisely the kind of question worth putting to an adviser once, at the start.

Does buying a property change my tax position?

Materially. Mortgage interest and certain related costs are deductible within limits, and a buy-to-let brings rental income, depreciation and a different set of rules entirely. If you buy, plan to file, and keep the notarial deed and the loan documentation somewhere you can find them.

Where we can help

Tax is one of the two things that most often changes what a household can actually afford, the other being charges. When we discuss budgets with buyers we work from net monthly figures rather than gross salaries, because that is the number a lender and a landlord both care about.

A useful editorial test for who must file, and who should is to look at the consequence rather than the headline feature.

It is tempting to assume that the system as it stands today is automatically positive, but a serious property guide should also test the opposite case. For the question raised by “The system as it stands today”, the useful detail is not a generic list of advantages.

For who must file, and who should, note what you can see, what you can measure, what you need to ask and what would be expensive to change. For the question raised by “The system as it stands today”, the useful detail is not a generic list of advantages.

A stronger reading of where we can help starts by asking what would change for the resident on an ordinary weekday.

For the reform: a single tax class from 2028, ask which qualities will still matter after furniture has been moved in, the first season has passed and the household has settled into its normal schedule.