Tax class (classe d’impôt)

What is the ‘tax class (classe d’impôt)’? – The ‘tax class (classe d'impôt)’ in Luxembourg refers to the classification system used to determine the rate of income tax an individual must pay. Tax classes are based on personal circumstances such as marital status, household composition, and whether one has dependents. The tax class assigned to an individual directly influences the amount of income tax withheld from their salary.

How many tax classes are there in Luxembourg? - There are three main tax classes in Luxembourg:

How is my tax class determined? - Your tax class is assigned based on your personal situation at the beginning of the tax year, such as whether you are married, have children, or are a single parent.

Can my tax class change? - Yes, your tax class can change if your personal situation changes during the year. For example, if you get married, have a child, or get divorced, you may be assigned a different tax class.

How does my tax class affect my tax rate? - Your tax class determines the percentage of your income that is subject to tax. In general, those in Class 2 (married couples) benefit from more favorable tax rates, while Class 1 tends to have higher rates due to the absence of dependents or a joint income.

Can cross-border workers be classified into a tax class in Luxembourg? - Cross-border workers may also be classified into one of the tax classes based on their personal circumstances, though specific rules may apply, especially for those living in neighboring countries but working in Luxembourg.

Is a reform planned? - While it's still not confirmed, the Luxembourg government has announced a major tax reform that will introduce a single tax class for all taxpayers starting in 2028. The reform aims to replace the current system (Classes 1, 1a, and 2) with a system of individual taxation, regardless of marital or family status, in order to promote fairness and simplicity. According to the Minister of Finance, about 85% of the population is expected to benefit through increased purchasing power. However, the reform is projected to result in a long-term revenue loss of €800 to €900 million for public finances.

Synonyms: Income tax category, tax bracket, taxpayer classification, taxpayer group