Personal taxation · Luxembourg
Personal loan interest deduction in Luxembourg
Interest on a personal loan may be examined as special expenses depending on its economic link and the conditions of the regime. Capital repaid is not interest. The standard allowance is shared with certain insurance premiums; it is not an extra ceiling per loan.
Financial Services Luxembourg · Licensed accountant · Head of the firm: Mickaël LOC. Editorial update: .
Link the loan to its use
The name of the loan or the bank does not by itself determine the tax category. You need to check what the financing was used to acquire. A mortgage, a business loan and a consumer loan may be treated differently.
Where a loan finances several uses or has been refinanced, the allocation of the funds must be documented. The bank's certificate shows the interest but does not always settle how it is classified.
Capital, interest and insurance
The monthly instalment may contain several components. Only the amounts falling into the eligible category are to be considered. You must not use the total loan repayment as a deductible personal expense.
The relevant interest and the premiums sharing the reference allowance of EUR 672 must be grouped together, with the household increases allowed where applicable. Certain statutory exceptions require a separate analysis.
Fictitious example
A car loan costs EUR 400 a month, but the annual certificate shows only EUR 280 of interest. The EUR 4,800 of instalments is not the amount to claim. The EUR 280 must still be combined with the other expenses within the allowance.
Early repayment may involve fees whose treatment must be checked; their mere presence on the statement does not mean they can all be classified as interest.
Documents
- Contract, use of the financing and refinancing history.
- Annual certificate breaking down the interest.
- Premiums and expenses sharing the ceiling.
- Household situation and tax residence.
The firm’s other tax engagements
Depending on your situation, the firm also handles tax, VAT and payroll, the regularisation of late tax filings and assistance during a tax audit. Fees are listed in the firm’s fee grid.
Official sources and scope
The rules apply to the year and profile concerned. Examples flagged as fictitious explain a method; they are not an individual validation. The documents and options of your file are covered by a separate engagement.