AXA Assurances Luxembourg

Married couples: joint or individual taxation?

Since 2018, married couples residing in or working as cross-border commuters in Luxembourg can choose to be taxed jointly or individually. What are the advantages of either option? Does it affect the amount of tax paid? What are the implications of this choice? Our answers to help you see things more clearly.

Married couples: joint or individual taxation?

Since 2018, married couples residing in or working as cross-border commuters in Luxembourg can choose to be taxed jointly or individually. What are the advantages of either option? Does it affect the amount of tax paid? What are the implications of this choice? Our answers to help you see things more clearly.

Collective taxation of married couples

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Until recently, married couples had no choice but to file a joint tax return, i.e. as a single taxpayer. These couples were automatically taxed in class 2 - in accordance with the tax rates for the highest salary, and at a fixed rate of 15% for the couple's second salary. Tax was levied at source on each of the salaries and the completion of a tax return - mandatory in most cases - could allow tax deductions.

Opting for individual taxation

Since fiscal year 2018, the Luxembourg legislator has allowed a derogation from this form of joint taxation for married couples. From now on, married taxpayers can choose to be taxed individually. In practice, this means being considered single, i.e. being taxed in class 1 on the basis of your own income. The deduction limits are divided equally between the two spouses. This system is similar to the individual taxation system as it applies in the absence of marriage.

Is there a financial interest to be taxed individually when you are married?

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For Alexandre André, an accountant specialising in the taxation of individuals with accounting firm LPG in Luxembourg “this possibility does not offer any particular financial interest. When comparing the two options - individual and joint taxation - the difference on the overall amount of household tax is negligible.

So what are the advantages of opting for individual taxation?

“The main motivation of households that opt for individual taxation is to be taxed more fairly based on their individual salaries,” continues Alexandre, who explains that more and more couples are now managing their money independently. They can therefore be attracted by a distribution of contributions that better reflects their personal income.

Characterised by less solidarity and more impartiality, individual taxation also meets the needs of couples living separately or in the process of divorce.

It should be noted, however, that individualization can be totally individualized or provide for a reallocation of income between spouses with a common rate recorded on the spouses' withholding tax forms.

On a case-by-case basis

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In conclusion, this tax specialist is quick to point out that “it is impossible to provide advice without a thorough study of the situation". Indeed, the amount of tax depends on many factors: salary, dependent children, tax deductions, the nature of the income received...

One thing is certain, provident or savings products are a good way to benefit from tax reductions while preparing for the future. Need some advice? AXA experts are there to guide you towards the right solution for your projects.