Luxembourg income tax calculator

Twenty-three steps, and none of them bigger than two points

Luxembourg slices its income tax scale finer than any other country covered here. Class 1 has 23 steps, running from 8% at €13,250 to 42% above €234,900.

Between €19,850 and €51,800 the rate moves in one- and two-point increments through fifteen separate steps. The effect is a scale that behaves almost like a continuous function — closer to the German formula in outcome, and reached by the opposite method.

Like Japan and Portugal, the tariff is published as "rate × income − deduction" rather than as bands. The deduction column is what makes the steps join up, and this site's tests check it: every step lines up with the one below to within a euro or so of the published rounding.

Income is rounded to a multiple of €50 before the tariff applies, which is why the published table leaves a €50 gap between the top of one step and the bottom of the next. The tax at the very first taxable point is €1.60.

On €60,000 in class 1 the tariff charges €11,165 and the employment fund surcharge adds €782 — €11,946 in total, an effective rate of 19.9%.

Three tax classes, and class 2 is splitting in disguise

Luxembourg does not have one tariff, it has three. Class 1 is for single taxpayers. Class 2 is for married and partnered couples taxed jointly. Class 1a is for single parents and for taxpayers aged 65 or over.

Class 2 is not an independently drafted table. It is exactly twice the class 1 tax on half the income — pure income splitting, published as a separate tariff rather than as a rule. This site tests that identity across the range, and it holds to within a euro.

That makes Luxembourg's treatment of couples the most generous of any European system here for unequal incomes, and identical to Germany's Ehegattensplitting in effect while looking nothing like it on the page.

Class 1a sits between the two: it starts its exempt band at €26,450, the same as class 2, and then climbs much faster, with steps of 1.25 points through the middle. It is a partial split rather than a full one.

The same €60,000 of income taxed in class 2 gives €4,278 rather than €11,946 — a difference of €7,668 decided entirely by which class applies.

The employment fund surcharge, charged on the tax

On top of the tariff sits a majoration for the fonds pour l'emploi: 7.0% of the tax, rising to 9% above €150,000 of adjusted taxable income in classes 1 and 1a, or €300,000 in class 2.

Like Japan's reconstruction surtax and India's cess, it is charged on the tax rather than on the income, so it appears as no rate in the tariff table. A taxpayer in the 39% step actually faces 41.73% on their next euro, and above the threshold 42.51%.

It has been at those rates since the 2013 tax year, and it funds employment policy rather than the general budget — a hypothecation that is unusual in an income tax and is stated in the name.

The doubling of the threshold for class 2 is consistent with the splitting logic: a couple reaches the higher rate at twice the income, exactly as they reach every tariff step at twice the income.

The calculator shows it as a separate line, because folding it into the tariff would hide a charge that adds seven to nine per cent to every Luxembourg tax bill.

The same income in three classes

€80,000 of taxable income, run through each of the three tariffs.

Class 1 — single: €18,965 on the tariff plus €1,328 for the employment fund — €20,292, an effective rate of 25.4%.

Class 1a — single parent or 65+: €16,643 on the tariff plus €1,165 for the employment fund — €17,808, an effective rate of 22.3%.

Class 2 — jointly taxed couple: €8,465 on the tariff plus €593 for the employment fund — €9,057, an effective rate of 11.3%.

The spread between class 1 and class 2 on the same income is €11,235. Which class applies depends on marital status, age and residence, and it is the single most consequential thing to get right about a Luxembourg calculation.

How Luxembourg compares with the rest of this site

Against Germany, the two reach the same place by opposite routes. Germany defines a continuous polynomial with no bands; Luxembourg defines 23 bands so narrow that the result is nearly continuous. Both then split income between spouses.

Against Japan, the tariff format is identical — rate times income minus a deduction — and so is the surtax mechanism, charged on the tax rather than on the income.

Against Belgium and the Netherlands, the neighbours a cross-border commuter is likely to be comparing against, Luxembourg's headline top rate of 42% plus the surcharge is below the Dutch 49.5% and the effective difference for a family is wider still, because of class 2.

Against Ireland, the contrast is granularity: two Irish rates against twenty-three Luxembourg steps, on economies of comparable size and wealth.

What Luxembourg has that nothing else here does is three tariffs rather than one. Most systems adjust for household composition by moving thresholds or granting credits; Luxembourg prints a different table.

Four ways a Luxembourg estimate goes wrong

Using the wrong class. The gap between class 1 and class 2 on €80,000 is €11,235, and class is decided by marital status, age and residence rather than by choice.

Forgetting the employment fund. It adds 7.0% to 9% of the tax, and it is not in the tariff table.

Using the withholding tables as the tax. The retenue tables already include the fonds pour l'emploi and are built for monthly deduction; they are not the annual income tax tariff and do not give the same answer.

Ignoring the €50 rounding. Income is rounded down to a multiple of €50 before the tariff applies, which is why the published steps have gaps in them.

Cross-border workers, who are most of the workforce

Close to half the people working in Luxembourg do not live there. They commute daily from Belgium, France and Germany, and their tax position is one of the most consequential things about the Luxembourg system.

A non-resident is taxed in Luxembourg on Luxembourg-source income. Where at least 90% of worldwide income is taxable in Luxembourg, a non-resident can elect to be treated as a resident, which unlocks the deductions and the class treatment a resident gets.

Belgian residents have a lower threshold of 50% for that election, under the treaty. French residents have their own arrangements again.

The class question is where it bites: a married non-resident is placed in class 1 by default and has to elect into class 2 treatment, and the difference on a typical cross-border salary runs to thousands of euros.

None of that residence machinery is modelled here. This page applies the tariff you select to the income you enter, which is right for a resident and is a starting point rather than an answer for a commuter.

The credits that come off after the tariff

Luxembourg grants several credits against the tax rather than deductions from income, and they are applied after the tariff and after the employment fund surcharge.

The crédit d'impôt salarié goes to employees, tapering in and out across defined income ranges. A separate credit exists for pensioners and another for the self-employed.

The crédit d'impôt monoparental supports single parents, and it tapers with income above a threshold.

A cost-of-living credit was added to offset energy and inflation pressure, structured to reach lower incomes and withdraw quickly.

Each of them tapers, which means Luxembourg — like almost every system on this site — has real marginal rates above its published steps in the ranges where the withdrawals happen. None is applied here, so this figure is an upper bound for anyone entitled to them.

Tranches indiciaires, and why the barème moves in jumps

Luxembourg indexes wages automatically. When the cost-of-living index rises by a set amount, a tranche indiciaire is triggered and every salary in the country rises by 2.5% — a mechanism almost unique in Europe.

Because wages move in steps, the tax scale has to move too, or indexation would simply push everyone into higher steps. Adjustments to the barème are made in reference to those tranches rather than to a smooth inflation figure.

The result is that the Luxembourg scale changes irregularly: several years with no movement, then an adjustment covering several tranches at once. It is the opposite of the Austrian answer, which smooths the adjustment annually.

That irregularity is why the year attached to a Luxembourg barème matters more than in most countries, and why the barème used here carries its Mémorial reference: Mémorial A No 590 of 24 December 2024, applicable from the 2025 tax year.

Anyone comparing a figure from this page against a payslip should also remember that the withholding tables are a different document with the surcharge already folded in.

The dependency contribution, on a base of its own

Alongside social security, Luxembourg charges a contribution dépendance to fund long-term care insurance. It is not income tax and it does not follow the tariff.

Its base is unusual: it is charged on income after an abatement equal to a quarter of the social minimum wage, and unlike the health and pension contributions it has no ceiling. That makes it one of the few uncapped charges in the system.

The ACD's own barème page notes explicitly that its calculation does not take the dependency contribution into account, which is a rare piece of candour from a tax authority about the limits of its own published figures.

It is also charged on capital income, not only on earnings, which is where it differs most from the contributions that sit beside it.

None of it is in the figure on this page, which is income tax plus the employment fund surcharge and nothing else.

The deductions that come before the tariff

Luxembourg's tariff runs on taxable income, and several deductions stand between a salary and that figure.

Professional expenses attract a standard minimum deduction, with commuting relieved separately on a scale based on distance. Social security contributions are deductible in full.

Special expenses include interest on personal loans within a cap, premiums on life, health and accident insurance, contributions to a home savings scheme, and payments into a private pension plan — each with its own ceiling, and several with ceilings that rise with the number of children.

Home loan interest on an owner-occupied property is deductible on a scale that reduces with the number of years since occupation, which is an unusual construction and generous in the early years.

Because so much of Luxembourg's relief sits in deductions with individual caps rather than in the tariff, the gap between a salary and taxable income is wide and highly personal. This page takes the taxable figure, which is the one the barème applies to.

Reading a Luxembourg figure correctly

Which class. It is the single most consequential input, it is not a choice, and the gap between class 1 and class 2 runs to thousands of euros on an ordinary salary.

Which document. The barème is the annual income tax tariff. The retenue tables are for monthly withholding, already include the employment fund surcharge, and give a different answer.

Which surcharge. 7.0% of the tax, 9% above €150,000 in classes 1 and 1a or €300,000 in class 2. It is charged on the tax and appears in no tariff step.

Which residence. Nearly half the workforce commutes from Belgium, France or Germany, and a non-resident's treatment turns on elections and treaty thresholds rather than on the tariff.

The tariff itself is the least ambiguous part of the Luxembourg system: 23 published steps with a deduction column that makes them join up. Everything around it is where the answers diverge.

Class 1a, the half-split nobody explains

Class 1a is the least discussed of the three tariffs and the one that most needs explaining, because it is neither of the other two.

It begins its exempt band at €26,450 — the same as class 2, twice the class 1 figure — which makes it look like a full split at the bottom. Then it climbs far faster: steps of 1.25 percentage points where class 2 moves by one, reaching 39% at €51,850 where class 2 does not reach it until €108,200.

So the relief is front-loaded. A class 1a taxpayer on a modest income is treated almost as a couple; on a high income they are treated almost as a single person.

That is a deliberate design for the two groups it covers — single parents, and taxpayers aged 65 or over — where the case for relief is strongest at lower incomes and weakest at higher ones.

It also means that quoting "the Luxembourg tax rate" for someone in class 1a is meaningless without the income, because which of the two tariffs it resembles depends entirely on where they sit.

What twenty-three steps buy

Most tax systems settle on five to nine bands. Luxembourg uses 23, and it is worth asking what that granularity achieves.

The answer is smoothness. With steps of one and two points, the jump in marginal rate at any single threshold is small enough that no taxpayer faces a meaningful cliff, and the effective rate curve rises almost continuously rather than in visible stages.

Compare that with Pakistan, where the rate goes from 1% to 11% to 20% in two moves, or with Portugal's eight-point jump at €43,090. In those systems a raise across a threshold has a visible, sometimes unpleasant, effect that Luxembourg's design deliberately avoids.

The cost is legibility. Nobody can hold 23 steps in their head, and Luxembourg taxpayers in practice rely on the administration's own calculator rather than on the table — which is exactly what the table's format, rate times income minus a deduction, is designed for.

It is the same trade-off Germany made and resolved the other way: a formula nobody can compute mentally, published because the outcome matters more than the readability of the rule.

Questions

How much income tax do I pay on €60,000 in Luxembourg?

€11,946 in class 1 — €11,165 on the tariff plus €782 for the employment fund, an effective rate of 19.9%. The same income in class 2, as a jointly taxed couple, is €4,278.

What are the Luxembourg tax classes?

Three. Class 1 is for single taxpayers, class 2 for married and partnered couples taxed jointly, and class 1a for single parents and taxpayers aged 65 or over. They are three separate published tariffs, not one tariff with adjustments.

Is class 2 the same as income splitting?

Exactly that. The class 2 tariff is twice the class 1 tax on half the income, across the whole range — it is splitting published as a separate table. That makes it identical in effect to German Ehegattensplitting while looking nothing like it on the page.

What is the fonds pour l’emploi surcharge?

A majoration of 7.0% of your income tax, rising to 9% above €150,000 of adjusted taxable income in classes 1 and 1a or €300,000 in class 2. It is charged on the tax rather than the income, so it appears as no rate in the tariff — a taxpayer in the 39% step actually faces 41.73% on the next euro.

How many tax brackets does Luxembourg have?

23 in class 1, more than any other country on this site. The steps are one and two points wide through most of the range, which makes the scale behave almost like a continuous function.

When does Luxembourg income tax start?

At €13,250 in class 1 and €26,500 in classes 1a and 2. The tax at the very first taxable point is €1.60, because income is rounded to multiples of €50 before the tariff applies.

Which year is this barème?

The one applicable from the 2025 tax year, published in Mémorial A No 590 of 24 December 2024. It is the most recent barème the Administration des contributions directes publishes, and the figures here come from its own automated calculation spreadsheet.