{"id":3028,"date":"2017-10-12T11:08:55","date_gmt":"2017-10-12T09:08:55","guid":{"rendered":"https:\/\/my-life.lu\/?p=3028\/"},"modified":"2021-03-04T09:51:02","modified_gmt":"2021-03-04T08:51:02","slug":"tax-returns-do-the-maths-to-subtract-more-52004","status":"publish","type":"post","link":"https:\/\/my-life.lu\/en\/tax-returns-do-the-maths-to-subtract-more-52004\/","title":{"rendered":"Tax returns: do the maths to subtract more"},"content":{"rendered":"
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Taxes can be stressful, and filing a return may seem an insurmountable hurdle. But with the right information and documents, understanding taxation is almost easy \u2013 and can result in some nice allowances, as was the case for D\u00e9borah and J\u00e9r\u00f4me.<\/em><\/p>\n

Married since 2018, working in Luxembourg and living in Esch-Belval, D\u00e9borah (31) and J\u00e9r\u00f4me (33) file a joint tax return<\/strong><\/span><\/a>. They are placed in tax class\u00a02. Taxe classes (1, 1a or\u00a02) are determined according to the family status of the taxpayer(s) (single, married, divorced, etc.). In Luxembourg, tax is withheld from wages on the basis of this tax class, ultimately determining your net salary.<\/p>\n

Every year<\/strong><\/span><\/a>, our couple check the accuracy of the figures on their\u00a0 PAYE slip<\/a><\/strong> <\/span>\u2013 this piece of A4 paper shows the amount of tax deducted at source. It is sent to employees at their home address, and must be given to their employers. They notify the Luxembourg Inland Revenue (ACD) if they do not receive it. If they fail to give this slip to their employer, the tax deducted from their wages will be calculated according to tax class\u00a01, which is at least 33%. Not cool.<\/p>\n

In the case of our young married couple, D\u00e9borah has the main PAYE slip as she is paid the higher, more stable salary. J\u00e9r\u00f4me receives a secondary PAYE slip with the same tax class\u00a02 showing a flat-rate deduction of 15%.<\/p>\n

Until recently, J\u00e9r\u00f4me and D\u00e9borah did not know that they could ask for certain tax breaks<\/a><\/strong><\/span>\u00a0to be mentioned on this slip (additional professional expenses, loan interest, premiums on a life assurance policy, contributions to a home savings plan, etc.). This is worth bearing in mind, even if it means getting some help to see things more clearly and avoid making mistakes.<\/p>\n

A summary document, the pay slip, shows the amount of tax actually deducted at source for any given year. This slip is issued by the employer at the beginning of the following (tax) year and includes all of the information needed to file a return. Once they have this document at hand, our young couple just have to minimise their tax by deducting as many expenses as they can. Considering how much this can amount to, they wouldn\u2019t want to skip it!<\/p>\n

Visit deductionsfiscales.lu to learn about the main deductible expenses<\/em><\/p><\/blockquote>\n

Deductible expenses<\/strong><\/h2>\n

Visit deductionsfiscales.lu<\/a><\/strong><\/span> to learn about the main deductible expenses such as life insurance\/assurance policies, home savings plans<\/strong><\/span><\/a>, and even interest on mortgages and consumer loans. For our young couple, the maximum allowance is EUR10,432 in their current situation. When they have a child, the limits for home savings, insurance and loan interest will be higher, and the total allowance could reach EUR12,448.<\/p>\n

Of course, to be able to deduct such amounts, you will need the relevant documentation. In 2020, D\u00e9borah and J\u00e9r\u00f4me could only invest EUR1,700 each in a life assurance plan, well below the maximum allowance. They will contact their bank manager soon to increase the value of their policy ahead of the 2021 tax return. However, by adding the EUR2,688 home savings allowance to the EUR1,344 insurance and interest allowance, our couple can deduct EUR7,432 in 2020, just on the spending items shown on deductionsfiscales.lu<\/a><\/strong><\/span> Not bad!<\/p>\n

But why stop there? Other items can also ease the couple\u2019s tax burden, including:<\/p>\n