15. Rental income

When to declare rental income?

You must declare rental income if you receive rent from:

• A property located in Luxembourg or abroad,
• Whether it is rented furnished or unfurnished.

How is rental income calculated?

Taxable income is not equal to the gross rent received. You can deduct many expenses.

Income to declare

• Gross rents received (without charges): rents for 2024.
• Rents from previous years: arrears collected in 2024.
• Garages / parking spaces: rents received separately from the dwelling.
• Non-return of deposit: deposit retained at the end of the lease.
• Rental charges (without statement provided): provisions kept by the owner.

Possible deductions

You can deduct, without limit, all expenses incurred to acquire, secure, and maintain your rental income, as long as they are not borne by the tenant.

These include:

• Interest and loan-related fees (mortgage deed fees, one-time commission, processing fees).
• Management fees and concierge salaries.
• Property taxes and municipal taxes (garbage, sewage, sanitation).
• Maintenance and minor repairs (painting, boiler, small works).
• Cleaning costs and non-recoverable condominium fees.
• Depreciation
• Insurance premiums (fire, water damage, liability, etc.).
• Mandatory works fund contributions.
• Expenses related to renting (advertisements, inspections).
• Costs of recovering unpaid rent.
• Various other expenses incurred for renting.

Flat-rate deduction for acquisition costs

Instead of actual expenses, the taxpayer may opt for a flat-rate deduction if certain conditions are met:

• The property is fully part of the private estate.
• The property has been completed for at least 15 years as of January 1 of the tax year.

The flat-rate deduction is set at 35% of gross rents, with a cap of 2.700€ per year and per property.

It covers all acquisition costs, except:

• Loan interest,
• Management fees and concierges,
• Property taxes and municipal taxes,

Once this choice is made, it is possible to switch back to actual expenses, but you must wait 15 years before being able to opt for the flat-rate again.

Negative rental income

It is possible that your expenses exceed the rent received (for example, in case of major renovations or high loan interest).

In this case, you declare a negative net income.

Rental losses can be offset against your other net income for the same year (e.g., your salary). This directly reduces your overall taxable base.

Example: Negative rental income

Marc rents a house he has just renovated.

• Rents received in 2024: 12.000€
• Loan interest: 6.000€
• Management and insurance fees: 1.500€
• Major renovation works: 4.500€
• Annual depreciation: 3.000€

Calculation of net taxable income:
12.000 € – (6.000 € + 1.500 € + 4.500 € + 3.000 €) = –3.000 €

Marc declares a negative rental income of –3.000 €.

This deficit of –3.000 € is not lost: it can be offset immediately against Marc's other income (e.g., his salary).

If Marc earned 50.000 € in salary, his total taxable income will be reduced to 47.000 €. He will therefore pay less tax that year.

How positive rental income is taxed

Rental income in Luxembourg

Net income (after deductions) is taxed directly in Luxembourg. It is added to your other income (salary, pension, etc.) and subject to the Luxembourg progressive tax scale.

Example 1: Positive rental income

Claire rents an apartment in Luxembourg City.

• Rents received in 2024: 15.000 €
• Loan interest: 4.000 €
• Syndic and insurance fees: 1.000 €
• Painting and minor repairs: 2.000 €
• Annual depreciation: 2.500 €

Calculation of net taxable income:
15.000 € – (4.000 € + 1.000 € + 2.000 € + 2.500 €) = 5.500 €

Claire must declare 5.500 € of taxable rental income.
This 5.500 € is added to her other income (e.g., salary) to calculate her total tax.

Foreign rental income

Even if a property is located abroad, you must still declare it in Luxembourg. However, this income is not taxed a second time in Luxembourg (it is in principle taxable only in the country where the property is located, according to tax treaties).

However, foreign rental income is taken into account to determine your average tax rate.

Simplified example:

• Salary in Luxembourg: 50.000 €
• Foreign rental income: 10.000 €

Luxembourg calculates the tax rate as if you had 60.000 €. This rate is then applied only to your 50.000 € of Luxembourg income. Thus, foreign rental income does not generate direct tax in Luxembourg, but can increase your tax rate and therefore your taxes on Luxembourg income.

Partial exemption for social housing rental management

Net rental income from social housing management (organizations contracted with the Ministry of Housing) benefits from a 90% partial exemption starting from the 2024 tax year.