A timetable is beginning to emerge for the tax reform: it “will be in place on January 1, 2028,” announced Gilles Roth (CSV), Minister of Finance, during the presentation of the 2026 budget to the Chamber. An outcome for a long-awaited measure, planned under the previous legislature (2018-2023), but which the DP-LSAP-Déi Gréng government had been forced to abandon, due to lack of budgetary room for maneuver.
While waiting to know the details, the spirit of the reform has been outlined. “It will primarily benefit those who live alone. But single-parent families will also be better off, because the idea is to relieve tax class 1A,” explains MP André Bauler, vice-president of the Finance Committee in the Chamber of Deputies. The tax administration will individualize the tax, instead of calculating according to the household, with differences according to status (single, married, civil partnership).
A broad line has been drawn, so as not to upset anyone: “In principle, no one should be a loser,” slips André Bauler. Lower incomes should benefit more. A single person earning 50,000 euros per year would see their tax rate go from 5,572 to 3,071 euros, or a gain of 2,501 euros over the year, the Ministry of Finance has already said. Obviously, this will not be neutral for state finances: a cost of 800 to 900 million euros per year is anticipated.
What are the key changes to Luxembourg’s income tax brackets as part of the 2028 reform?
Table of Contents
- 1. What are the key changes to Luxembourg’s income tax brackets as part of the 2028 reform?
- 2. Luxembourg Tax Reform Announced: Lower Taxes for Citizens Starting in 2028
- 3. Understanding the Landmark Changes to Luxembourg’s Tax System
- 4. Key Components of the 2028 Tax Reform
- 5. Who Benefits from the Luxembourg Tax Reform?
- 6. Impact on Specific income Levels: Projected Savings
- 7. Luxembourg Tax System: A Brief Overview
- 8. Preparing for the 2028 Tax Changes: Practical Tips
Luxembourg Tax Reform Announced: Lower Taxes for Citizens Starting in 2028
Understanding the Landmark Changes to Luxembourg’s Tax System
Luxembourg has announced a meaningful overhaul of its tax system, promising lower taxes for citizens beginning in 2028. This reform, detailed by the Ministry of Finance earlier this month, aims to boost disposable income, incentivize work, and enhance Luxembourg’s competitiveness as a place to live and work. This article breaks down the key changes, who benefits, and what you need to know to prepare. We’ll cover everything from income tax bracket adjustments to changes in tax allowances and deductions.
Key Components of the 2028 Tax Reform
The reform centers around a simplification of the income tax system and a reduction in the overall tax burden. Here’s a detailed look at the core changes:
* income Tax Bracket Adjustments: The existing income tax brackets will be revised and, in most cases, widened. This means more income will fall into lower tax brackets, resulting in less tax paid. Specific bracket details are expected to be finalized by Q2 2026, but initial projections indicate a shift towards a more progressive, yet less burdensome, system.
* Increased Basic Allowance: The basic personal allowance – the amount of income you can earn tax-free – will be considerably increased. This is particularly beneficial for low and middle-income earners. The proposed increase is estimated to be around 20%, offering substantial relief.
* Family Quotient Adjustments: The family quotient system, which considers the number of dependents when calculating taxable income, will be refined. Changes aim to provide greater tax benefits to families with children, particularly those with multiple dependents.
* Tax Credit for Childcare Costs: A new tax credit will be introduced to help offset the costs of childcare. This is a direct response to the rising cost of childcare in Luxembourg and aims to support working parents.
* Elimination of Certain Tax Deductions: While many deductions will remain, some less-utilized or deemed inefficient tax deductions will be eliminated to streamline the system. Details on these specific deductions will be released in the coming months.
Who Benefits from the Luxembourg Tax Reform?
The tax reform is designed to benefit a broad range of Luxembourg residents, but some groups will see more significant advantages than others:
* Low-Income Earners: The increased basic allowance and adjustments to lower tax brackets will provide substantial tax relief for those with lower incomes.
* Families with Children: The refined family quotient system and the new childcare tax credit will significantly reduce the tax burden for families.
* Middle-Income Earners: While the benefits may not be as dramatic as for low-income earners, middle-income earners will still experiance a reduction in their overall tax liability due to bracket adjustments.
* Working Parents: the childcare tax credit directly addresses a significant financial burden for working parents, providing much-needed relief.
Impact on Specific income Levels: Projected Savings
While precise figures depend on individual circumstances, here are some projected tax savings based on different income levels (estimates based on current projections as of October 26, 2025):
| Annual Income (€) | Projected Annual Tax Savings (€) |
|---|---|
| 30,000 | 500 – 800 |
| 50,000 | 800 – 1,200 |
| 80,000 | 1,500 – 2,000 |
| 120,000 | 2,500 – 3,500 |
These are estimates and subject to change based on final legislation.
Luxembourg Tax System: A Brief Overview
Luxembourg operates a progressive income tax system. This means that the tax rate increases as your income increases. The current system features several tax brackets, with rates ranging from 0% to 43%.Understanding the current system is crucial to appreciating the impact of the upcoming changes. Key elements include:
* Resident Taxpayers: Individuals residing in Luxembourg for more than six months are generally considered tax residents and are taxed on their worldwide income.
* non-Resident Taxpayers: Non-residents are typically taxed only on income sourced from Luxembourg.
* Taxable Income: Taxable income is calculated by subtracting allowable deductions and allowances from gross income.
* Tax Filing: Tax returns are typically filed online through the MyGuichet platform.
Preparing for the 2028 Tax Changes: Practical Tips
While the changes won’t take effect until 2028, it’s wise to start preparing now:
- Review Your current Tax Situation: Understand your current income, deductions, and tax liability. this will provide a baseline for comparing your tax situation after the reform.
- Stay Informed: Regularly check the Ministry of Finance website (https://finances.public.lu/en.html) for updates and detailed data on the tax reform.
- Consult a Tax Advisor: consider consulting a qualified tax advisor to discuss how the changes will specifically impact your financial situation.
- adjust Financial Planning: Factor the potential tax savings into your long-term financial planning, such as
