How to optimise your tax declaration?

Every year, many of you fill in your annual tax returns and for some, this exercise is like a chore. For many of you, this annual exercise is like a chore. It is a pity because a tax declaration correctly anticipated can save you money by reducing your taxes. Today, the range of tax-deductible products is so broad that it is sometimes difficult to choose. To help you get a better picture, we will describe the main fiscal products available on the market.

1. Home savings

You can deduct the contributions paid for a home savings policy from your taxable base. The home savings policy allows you to receive a loan with attractive conditions for the purchase of a personal residence in exchange for contributions.

The contributions paid into a savings contract are deductible up to a ceiling of 672 euros, increased to 1344 euros if the youngest subscriber is between 18 and 40 years of age at the beginning of the tax year. This ceiling is increased by its own amount for the husband/spouse (or partner in the case of a partnership) and for each child in the household.

In order to benefit from tax deductibility, the home savings contract must meet certain conditions , the main one being that the home savings contract must be taken out in order to finance the construction, acquisition or transformation of an apartment or a house to be occupied by the owner.

2. Private pension insurance

Taking out an old-age pension contract allows you to create savings for your retirement age. This supplementary private pension scheme is the third pillar of the Luxembourg pension system and complements the statutory scheme (first pillar) and any supplementary pension scheme set up by the employer (second pillar).

The deduction ceiling for a private pension insurance contract depends on your age and varies from EUR 1,500 to EUR 3,200.

3. Personal loan and debit interest

You can also deduct from your total net income all or part of the debit interest linked to personal loans (purchase of movable goods, purchase of a car, holiday financing, acquisition of a portfolio of investment securities, funds to help maintain your standard of living, etc.). The debit interest on your current account or your credit card is also deductible.

However, are not included in this category the debit interest related to loans contracted in order to finance the acquisition or construction of the taxpayer’s personal residence or a residence to let or to carry out a self-employed or commercial professional occupation.

The above interest is deductible up to an annual limit of 672 euros, increased by the same amount for the jointly taxable spouse (or partner in case of partnership) and also for each of the taxpayer’s children subject to a tax allowance for children.

4. Insurance contributions and premiums

Certain contributions and insurance premiums may also be deducted from your total net income. These contributions and premiums are mainly paid for life, death, accidents, invalidity, sickness or civil liability insurance.

For example, in the case of comprehensive motor insurance, only the part relating to civil liability and bodily injury is potentially deductible (premiums relating to other risks are not concerned) 

These insurance premiums are deductible under the same annual ceiling of 672 euros available for interest expenses. However, this limit may be increased if a single premium is paid for a death insurance policy taken out to guarantee the repayment of a loan for the purchase of a property (the outstanding balance insurance). This increase varies according to the age of the taxpayer and the composition of the household.

Figure it out: if you have the 4 fiscal products mentioned above, you can deduct more than a few thousand euros per year from your total net income! Not bad, is it?


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