Tax classes in Luxembourg: how to determine yours and what impact it has on your salary

What is the tax class in Luxembourg?

The tax class is the cornerstone of income tax calculation in Luxembourg. It enables the ACD to adapt the progressive tax scale to your family situation. In other words, depending on the class assigned to you, your overall tax rate varies so as to reflect your household situation as accurately as possible.

What are the tax classes in Luxembourg?

The Grand Duchy distinguishes between three tax classes, each designed for a different life situation:

• Class 1: for single people, with no dependants or dependent children.
• Class 1a: an intermediate category covering single people with children, civil partners or widowed persons.
• Class 2: reserved for married couples (taxed jointly), with or without children.

A new tax reform is planned for 2028 and provides for the abolition of the three tax classes in favour of a single tax class. 

How do you know which tax class you are in?

Your tax class is determined by the ACD according to your exact family situation on 1st January of the current tax year. Marital status (single, married, registered partner) and the possible presence of children or dependants: these are the criteria that tip the balance.

Good to know: it is up to you to inform the ACD of any change in circumstances, so that your withholding tax card can be updated, avoiding any unpleasant surprises at the end of the year.

Why is the tax class important?

It directly influences two things: the amount withheld from your salary each month, and the final calculation when you file your annual tax return. In short, this mechanism introduces a principle of family fairness into the Luxembourg system, adjusting the tax burden to the actual responsibilities of your household.

Class 1: who does it apply to?

Class 1 is intended for single or separated persons, with no dependants or children who are tax dependants. It is the basic category for most young working people starting their career in Luxembourg. The tax scale is then applied strictly to net taxable income, with no family quotient: no particular family responsibilities are taken into account in the calculation.

Class 1a: when does it apply?

Designed as an intermediate class, class one A protects certain profiles according to precise criteria set by Luxembourg tax law. It applies in particular to single persons above a certain age, widowers and widows, as well as people living alone with one or more dependent children.

To benefit from it, you must meet the legal conditions very carefully. 

The aim is to offer tax treatment that is better suited to these situations, with a scale that is often slightly more favourable than that of Class 1.

Class 2: married couples and registered partners

Class 2 is reserved for married couples. It allows you to opt for joint taxation of all your worldwide income, a system which, in the vast majority of cases, proves more favourable than Class 1.
The progressive tax scale applied helps to reduce the overall tax burden, which is a real advantage when there is a significant income gap between partners. This is a measure designed to reflect the economic reality of a stable household and to balance the tax burden.

Special case: taxation of civil partners

For civil partners, the rule is different: each partner remains in Class 1, but you can benefit from being treated as a married couple in N+1 through your tax return. Cross-border workers can also benefit from this, provided they first have their civil partnership recognised by the Luxembourg authorities.

What should you do if your family situation changes?

Marriage, birth, registered partnership, divorce or death: these events have a direct impact on your tax situation. What should your first reaction be? Inform the Direct Tax Administration (ACD) promptly.
By reporting these changes without delay, you ensure that your tax class and the deductions made from your salary each month are adjusted automatically.