2025 Tax: Ceilings and interest deductions for principal residence

The interest expense deduction will change in 2025: find out about the new ceilings and optimise your tax return!

From tax year 2024, new rules will apply for the deduction of interest expense relating to a principal residence in Luxembourg. These adjustments will have an impact on the tax return, as the date of availability of the home will now be taken into account when determining the deduction limits.

1. The availability date: a new key criterion

From now on, the ceiling on deductible interest charges will be determined on the basis of the date on which the main home becomes available, rather than the date on which you move in. This date corresponds to the time when the property is ready to be occupied, even if the actual move-in takes place later.

It varies according to the type of property and its condition:

• For a VEFA (vente en l'état futur d'achèvement) purchaseThe date of availability corresponds to the end of the works and the handover of the keys.

• For an existing home If the property is immediately habitable (with only minor work such as painting or replacing floor coverings), the availability date corresponds to the date of purchase. On the other hand, if the property requires complete renovation before it can be made habitable, the availability date will be the date on which the essential work is completed.

💡 To be noted Uninhabitable dwellings: a dwelling is considered uninhabitable if it does not have basic facilities, such as heating (central or auxiliary), sanitary facilities, a kitchen area and a room offering sufficient shelter for living and resting. In this case, the date of availability corresponds to the time when these elements are in place, making occupation possible.

2. New deduction limits

The ceilings on deductible interest expenses are now defined according to the date on which the property becomes available:

• Availability after 31/12/2022: Full deduction.
• Availability between 31/12/2018 and 01/01/2023: €4,000 per person.
• Availability between 31/12/2013 and 01/01/2019: €3,000 per person.
• Availability before 01/01/2014: €2,000 per person.

These ceilings apply to each member of the household, including the spouse and children, allowing tax optimisation.

💡 Good to know In the year of purchase (2024), the notary's fees for opening a loan and the bank commission are also deductible, in addition to the interest charges. This measure is designed to reduce the tax burden in the first year of purchase.

3. Concrete examples

Example 1 - A couple with one child buying a property in 2024

- Acquisition date: 15/03/2024
- Availability date: 15/03/2024 (immediately habitable)
- Interest expense in 2024: €12,000
- Notary's fees for opening a loan: €2,500
- Bank commission: €1,500

Calculating the tax deduction
- Applicable ceiling: Full deduction (available after 31/12/2022)

Total amount of deductible expenses :
- Interest expense: €12,000
- Notary fees: €2,500
- Bank commission: €1,500
- Total deductible in 2024: €16,000

Thanks to this measure, the couple will be able to deduct the full €16,000 from their taxable income for 2024, thereby optimising their tax situation.

Example 2 - A couple with one child buying a property in 2020

- Acquisition date: 01/06/2020
- Availability date: 01/06/2020 (immediately habitable)
- Interest expense in 2024: € 10,000

Calculating the tax deduction
- Applicable ceiling: €4,000 per person (available between 31/12/2018 and 01/01/2023)

Total amount deductible :
- Limit per person: €4,000
- 3-person household (couple + 1 child) → €4,000 x 3 = €12,000
- Interest expense in 2024: € 10,000

As the total interest expense (€10,000) is less than the authorised limit (€12,000), the couple will be able to deduct the full €10,000 from their taxable income for 2024.

4. Things to remember

• The availability date replaces the move-in date as the tax criterion.
• The deduction ceilings are adjusted according to the year in which the property is available.
• The deduction remains integral for recent acquisitions (after 2022).
• For older homes, a ceiling per person applies.

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