Home loan : tax aspects

If you have a home loan, you can take advantage of certain tax breaks:

- Tax break: You can deduct from your tax the interest paid on a home loan granted:

  • To purchase land for building:

- if construction starts within two years of the land being purchased, you can deduct all of the debit interest;

- if construction starts more than two years after the land is purchased, you can deduct up to €672 in debit interest per person of your household;

  • To purchase a home to be occupied by the owner:

- the amount that you can deduct as debit interest on the loan depends on the persons making up your household and the length of occupation;

  • To purchase rental accommodation:

- You can deduct all of the debit interest.

The fees and expenditure charged on your loan (mortgage registration) can be deducted in full, provided you were not living in your home when this outlay was incurred. The costs for the notarial instrument cannot be deducted since they are included in the purchase price.

You can take advantage of a tax allowance for insurance premiums of €672 per household member.

If a single premium is paid for the Debt Balance Insurance, the ceiling rises by €6,000 (doubles if you are taxed collectively), plus €1200 for every child in the household.

For tax payers over the age of 30, the allowance for a single premium increases by 8% for every year that the policy holder was over 30 when the insurance was taken out.*

* For more information, please contact your branch.

A personal tax credit of €20,000, from which registration duties and fees can be deducted (around 7% of the purchase price), is granted on the acquisition of realty located in Luxembourg and documented by notarial deed. A lump-sum levy of €100 (per application) must be paid to cover administrative costs.

Since 1 November 2002, two VAT systems have coexisted for activities relating to construction or renovation works on a home serving as the principal residence.

To avoid advance payment of VAT, in certain cases the new law allows the immediate application of a super-reduced 3% rate on construction and renovation works undertaken by contractors or professional tradesmen.


Articles that might interest you

  • Often you hear people say: “Anyway, until I have paid off my home loan it’s the bank who owns my house”. But is it true?

  • It is always the same question that every one of us is asking before signing a home loan with his bank. To gain a more objective overview, let’s analyse them one by one with their respective advantages and disadvantages.

  • The rate remains fixed for a pre-defined period and, at the end of the period, is subject to a revision. The pre-defined period can vary from one bank to another but is generally 3, 5 or 10 years.

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