Outstanding balance insurance: single or annual premium?

An outstanding balance insurance serves as security for the payback of a real estate loan of a property for personal use.
 
So, in order to provide for the case of death or invalidity and to not leave any liabilities to the surviving family members, it is possible to take out an outstanding balance insurance and to deduct the insurance in the tax return in Luxembourg. 
 
Although, a reasonable question that many people ask is, which of the payments is more beneficial: the annual or the single premium payment of the outstanding balance insurance?
Annual payment of the outstanding balance insurance:
 
In the case of an annual payment, the deductible amount for the outstanding balance insurance is included in the normal deductible amount of 672€ per person, which applies in total to all deductible insurances and debt interest.
 
As a consequence, if you already deduct other insurances and interest on debt, the maximum deductible amount may already be reached, and you will not be able to deduct the outstanding balance insurance on your tax return.
 
Example:

A family (2 adults and 2 children) can deduct a total of up to 2,688€ for insurance premiums (including outstanding balance insurance) and interest on debt, which corresponds to a tax refund of up to 1,230.50€.
 

Single premium payment of the outstanding balance insurance:
 
The single payment increases the maximum deductible amount of the special expenses.
 
In this case, the deductible amount is limited to the value of the single payment, but without exceeding 6,000€. In addition, the maximum amount increases by 1,200€ for each child in the household, and 8% is added for each year of life over 30.
 
The maximum deductible amount for the outstanding balance insurance for a single payment:

  • 6,000 € per person
  • 1,200 € per child
  • + 8% per year over the age of 30
 
Example:

A family of 4, first parent (age 40), second parent (age 38), and 2 children can deduct up to 24,960€.
 
First parent (40 years): 
  • 6.000€ + 2 x 1.200€ = 8.400€
  • 8% x 10 x 8.400€ = 6.720€.
 
Second parent (38 years):
  • 6.000€
  • 8% x 8 x 6.000€ = 3.840€
 
Total:
  • 24,960€
 
Using taxx.lu, you don't have to do any complicated calculations, our system will automatically calculate the deductible amount for the outstanding balance insurance.

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