Single-parent family: the budget headache

Single-parent families in Luxembourg face a double challenge in managing their budget, lower average income and an additional tax burden. How can they cope and what support are they entitled to? myLIFE fills you in.*

With lower incomes, unavoidable costs (rent, energy, etc.) and at times additional expenses (childcare), single-parent families often find it more difficult to make ends meet. This is all the more true because, with the same annual gross income, they may—depending on their income level and at the time this content is written—be subject to a significantly higher average tax rate than a couple taxed jointly.

Increased risk of poverty

According to the last edition of STATEC’s Work and Social Cohesion Report, single-parent households face a lower standard of living. Representing around 6.3% of the population, they had an average standard of living of €3,956 per month in 2024. By comparison, this average amount was €4,712 for a married couple with children. Singleparent families also remain the households most affected by persistent poverty (lasting several years). About one third of them (31.6%) were in this situation between 2023 and 2024, whereas only 8.7% of other households with children were. It’s therefore no surprise that single-parent families are at a greater risk of poverty.

Single-parent families are at a greater risk of poverty.

Tax, a double blow for single parents

Another key factor is tax. Single parents aren’t subject to the same tax regime as married couples. At equal incomes, members of Category 1a (single parents, widows/widowers, some peolpe over the age of 64) are taxed more than those in Category 2. For single-parent families, it’s a double blow.

This situation has certainly been mitigated by the single-parent tax credit which has been increased several times. For the 2024 tax year, its amount is €2,505 if the adjusted taxable income is below €60,000, and it ranges between €2,505 and €750 for taxpayers whose annual income falls between €60,000 and €105,000. It is then set at €750 for incomes above €105,000.

According to tax legislation, starting from the 2025 tax year, the singleparent tax credit will increase to €3,504 per year for adjusted taxable income below €60,000. It will then be gradually reduced from €3,504 to €750 for taxpayers whose annual income falls between €60,000 and €105,000. Finally, for adjusted taxable income above €105,000, it will amount to €750 per year.

It is also reduced by 50% of the total amount of benefits received on behalf of the child, insofar as these exceed an annual amount of €2,712 (€226 per month). These benefits include, in particular, child support payments, maintenance costs, education and vocational training expenses, etc., excluding family allowances.

Support for parents and children

Having a child in the home not only impacts expenses: when parents reduce working hours to look after their loved one, it can also reduce their income. With this in mind, current legislation allows for parents to benefit from certain types of support.

Available to all families under conditions, the birth allowance is made up of three tranches of €580.03 each, namely the prenatal allowance, the birth allowance as such, and the postnatal allowance.

The family allowance is a fixed monthly payment by the Caisse pour l’Avenir des Enfants (€307.35 according to the current index). The allowance is paid until the child turns 18, or up to age 25 under certain conditions for young people pursuing secondary education, specialized schooling, apprenticeships, etc. The amount is increased by €23.23 for each child starting from the month in which they turn 6, and by €57.99 from the month in which they turn 12.

Lastly, the annual back-to-school allowance aims to help parents pay for school supplies once their child reaches 6 years of age (€115 for children from 6 to 11, €235 from 12 onwards).

The childcare service voucher aims to cover part of the cost of childcare in an approved childcare facility or by a child minder.

Supporting childcare

Another type of government support is the childcare service voucher, which aims to cover part of the cost of childcare in an approved childcare facility or by a child minder. These vouchers can also be put towards the cost of creative activities or sports. As such, they’re a helping hand for households in search of a childcare solution or hoping to introduce their children to certain activities.

Small day-to-day efforts

In addition to these various types of assistance, families can ease the pressure by cutting costs. How? By adopting small, simple but effective measures to reduce expenditure. For example, adopt good habits in the home to reduce energy bills, whether this be low-energy light bulbs, putting on a warm jumper rather than turning up the heating or carefully selected household appliances.

Other simple gestures directly involve very young infants. The arrival of a new baby can be a real upheaval, especially in financial terms. Drawing up a baby list, avoiding unnecessary purchases and choosing second-hand or homemade products are all ways of keeping costs down.

Lastly, certain expenses linked to the new school year can be scrutinised. While some supplies are free, you can make additional savings by taking stock of the material you already have, buying in batches when necessary or visiting a book exchange.

While there’s no miracle cure for reducing the financial pressure on single-parent families, various measures have been implemented in Luxembourg to support single parents, and simple actions can help lighten the burden of certain expenses. Taking the time to find out more and showing greater discipline can often make a big difference.

* Content translated from French by the BIL GPT AI tool