Amortissement: Tax Breaks Every Luxembourg Landlord Should Know

Ask most Luxembourg landlords what they earn from a rental apartment and they will quote you the monthly rent. Ask them what they actually pay tax on, and the answer becomes far less certain. The gap between those two numbers is where amortissement — depreciation — and a handful of deductible costs quietly do their work. In my thirteen years advising owners and investors across the Luxembourg market, I have watched the same pattern repeat: two people buy near-identical apartments in the same building, rent them for the same figure, and end the tax year with materially different net positions. The difference is almost never luck. It is whether they understood how the Luxembourg tax code treats a rental property.

This guide is the conversation I have with investor clients when they buy their first rental unit — or their fifth and realise they have been leaving deductions on the table. I will walk you through how depreciation works on a Luxembourg rental building, why the land underneath it does not depreciate, what the accelerated regime for newer buildings has looked like, and which running costs you are entitled to set against your rental income. This is general guidance grounded in how the market and the rules have worked in practice, not personalised tax advice — every situation has its own detail, and the figures below are illustrative ranges, not a promise for your specific case. But if you own or are about to buy property to let in Luxembourg, understanding these mechanics is the difference between an investment that works on paper and one that works in your bank account.

What Amortissement Actually Means for a Landlord

Amortissement — depreciation — is the tax system's acknowledgement of a simple physical fact: a building wears out. Roofs age, boilers fail, façades weather, kitchens date. The Luxembourg tax code lets you spread the cost of that gradual wearing-out across the years you own and let the property, deducting a slice of the building's value from your rental income each year. That deducted slice is not money you spend in cash — you already paid for the building when you bought it — but the tax office treats it as an expense, which means it reduces the rental income you are taxed on.

This is the single most misunderstood concept I encounter with new landlords. They think of their taxable rental income as rent minus the mortgage, or rent minus their out-of-pocket costs. In reality, the depreciation allowance can be one of the largest deductions on the whole return, and it costs you nothing in cash to claim. On a well-structured rental, it is entirely possible for the property to generate positive cash flow while showing a modest taxable profit — or in some years even a taxable loss — precisely because depreciation absorbs so much of the rent on paper.

Why the Land Does Not Depreciate — and Why the Split Matters

Here is the point that trips people up more than any other. When you buy an apartment or a house in Luxembourg, you are buying two things bundled into one price: the building, and the land it sits on (or, for an apartment, an undivided share of the land under the whole block). The building wears out over time and can be depreciated. The land does not wear out — a plot in Belair is as durable in fifty years as it is today — and so the land portion of your purchase price cannot be depreciated at all.

This means that before you can calculate any depreciation, you must split your total acquisition cost into a land component and a building component. Only the building component feeds the depreciation calculation. In central Luxembourg City, where land is extraordinarily scarce and valuable, the land share of an apartment's price can be surprisingly high — often somewhere in the region of a quarter to a third of the total for a typical apartment, and higher again for a house on its own plot. In more peripheral communes where land is less dear, the building share is proportionally larger, which — counterintuitively — can make a suburban property more depreciation-efficient per euro invested.

The tax administration expects a defensible basis for this split. You cannot simply assign ninety percent to the building because it suits you. A reasonable, documented apportionment — supported by the notarial deed, local land values, and the nature of the property — is what stands up if the split is ever questioned. This is one of the moments where a short conversation with a property investment adviser or your tax accountant pays for itself many times over.

The Standard Depreciation Rates by Building Age

Luxembourg applies depreciation to the building portion at rates that depend on the age of the building. The logic is straightforward: an older building has less useful life remaining, so it is written down faster. The rates below reflect the long-standing structure of the system — always confirm the current year's figures with your accountant, as the government periodically revisits them.

To make it concrete: suppose you buy an apartment and, after splitting off the land, you attribute €400,000 to the building. At the standard 2% rate, you would deduct €8,000 from your rental income every year purely as depreciation — before you count a single euro of mortgage interest, insurance, or maintenance. On an older building qualifying for the 3% rate, that same €400,000 building base would yield €12,000 a year. Over a decade, the difference between the two rates is €40,000 of deductions, which is why the age of the building is not a trivial detail.

Accelerated Depreciation for New Builds — a Moving Target

For years, Luxembourg encouraged private investment in new rental housing through an amortissement accéléré — an accelerated depreciation regime that let owners of newer buildings write down the building at a markedly higher rate for an initial window of years. The policy intent was simple: pull private capital into the construction of rental stock the country badly needs. For the landlord, the appeal was a large, front-loaded deduction in the early years of ownership, exactly when a new mortgage is at its most interest-heavy and cash flow is tightest.

The honest thing to tell you in 2026 is that this is a moving target. The accelerated rate, the age threshold a building must meet to qualify, and the number of years the boosted rate applies have all been adjusted more than once in recent budget cycles. In broad terms, the accelerated rate has sat somewhere in the region of 4% to 6% and applied for an initial period of several years for buildings below a defined age — but the precise figure, the qualifying vintage, and the eligibility conditions have changed, and transitional rules mean that what applies to a given property can depend on when it was completed or acquired. I deliberately keep the specifics general here because quoting a stale number would do you a disservice.

The practical takeaway is this: if you are buying a new or recently completed rental property, the accelerated regime in force at the time of your acquisition can materially change the early-year economics of the investment — and it is precisely the kind of detail to confirm in writing with your tax accountant before you commit, not after. The article on building a Luxembourg rental portfolio puts these early-year deductions in the wider context of yield and financing.

The Costs You Can Deduct Against Rental Income

Depreciation is the largest and least understood deduction, but it is far from the only one. Luxembourg lets a landlord deduct the genuine costs of earning rental income. Used together, these deductions frequently reduce taxable rental income to a fraction of the gross rent collected. The main categories are:

• Mortgage interest (intérêts débiteurs). The interest portion of your loan repayments — not the capital repayment — is deductible. In the early years of a mortgage, when interest dominates the payment, this is often the second-largest deduction after depreciation.
• Maintenance and repair costs. Genuine upkeep — repainting, fixing a boiler, replacing a worn kitchen, roof repairs — is deductible in the year incurred. The line between deductible maintenance and non-deductible improvement matters, and I return to it below.
• Non-recoverable co-ownership charges. The syndic charges you carry as owner that you cannot pass on to the tenant are deductible.
• Property management and letting fees. If you use an agent to manage the tenancy or to find and vet tenants, those professional fees are deductible.
• Insurance premiums. Landlord and building insurance relating to the let property.
• Property tax (impôt foncier). The communal property tax on the let property.
• Other direct costs. Advertising the property to let, certain administrative costs, and professional advice relating to the rental activity.

The distinction that catches landlords out most often is maintenance versus improvement. Repairing something that exists — restoring the property to working order — is generally a deductible expense in the year you pay it. Adding something that was not there before, or materially upgrading the property beyond its original standard, is generally treated as an improvement that adds to the building's value and is recovered through depreciation over time rather than deducted at once. Replacing a broken-down kitchen with an equivalent one leans toward maintenance; converting a garage into a studio leans toward improvement. When a project sits on the line, that is exactly when a five-minute check with your accountant saves an awkward correction later.

A Worked Example: Before and After Depreciation

Numbers make this real. Consider a landlord letting a two-bedroom apartment in a suburban Luxembourg commune. The figures below are illustrative and rounded, chosen to show the mechanism rather than to describe any specific property.

Look at what depreciation does here. Before it, the landlord has a €10,000 profit to be taxed at their marginal rate. After the €8,000 depreciation allowance, only €2,000 is taxable — even though not a single additional euro left the owner's pocket to claim that €8,000. The cash position of the property is unchanged; the taxable position is transformed. And if this were an older building at 3%, the €12,000 depreciation would have wiped out the €10,000 subtotal entirely, producing a small taxable loss that can, subject to the rules, offset other income. That is the quiet power of amortissement, and it is why I never let an investor client model a purchase on gross rent alone.

The Record-Keeping That Protects Your Deductions

Every deduction you claim is only as strong as your ability to substantiate it. The Luxembourg tax administration does not demand a shoebox of receipts with every return, but it can ask — and the landlords who sail through a query are the ones who kept clean records from day one. The discipline is not onerous; it simply has to be consistent.

Keep the notarial deed and the documentation supporting your land-versus-building split, because that split underpins every year's depreciation for as long as you own the property. Keep the annual mortgage statement showing the interest portion separately from capital. Keep every invoice for maintenance and repairs, and keep them in a way that makes the maintenance-versus-improvement character obvious — a photo of the failed boiler alongside the replacement invoice tells the story far better than the invoice alone. Keep the syndic's annual accounts identifying the non-recoverable charges. And keep it all together, year by year, so that reconstructing a return from four years ago takes minutes rather than a lost weekend.

None of this is glamorous, but it is the difference between a deduction that holds and one that evaporates under a polite letter from the Administration des contributions directes. In my experience the investors who treat their rental as a business — with a folder, a spreadsheet, and a habit — are also the ones who claim confidently and sleep well doing it.

Key Takeaways

• Amortissement lets you deduct a slice of the building's value from rental income each year — a substantial deduction that costs nothing in cash to claim.
• Only the building depreciates, never the land, so you must split your purchase price into land and building components on a defensible basis before you calculate anything.
• Standard rates are typically 2% for a normal building and 3% for older buildings, with an accelerated, time-limited higher rate for qualifying newer builds.
• The accelerated regime for new builds has been repeatedly adjusted — never model a purchase on last year's rate; confirm the one in force for your acquisition in writing.
• Beyond depreciation, mortgage interest, maintenance, syndic charges, insurance and property tax are all deductible — and clean record-keeping is what protects every one of them.

Frequently Asked Questions

Does depreciation reduce the price I pay tax on when I eventually sell?

Depreciation and capital gains are separate mechanisms. The depreciation you claim each year reduces your annual taxable rental income while you own and let the property. The tax treatment of any gain when you sell follows its own rules on holding periods and allowances. Because the interaction between the two can be involved, it is worth mapping out both sides with your accountant before a sale rather than being surprised at the end.

Can I claim depreciation if I have no mortgage on the property?

Yes. Depreciation is based on the value of the building, not on how you financed it. A landlord who bought outright with cash claims the same building depreciation as one who borrowed — they simply do not have the additional deduction for mortgage interest that the borrower enjoys.

How do I decide the split between land and building?

The split should reflect the genuine underlying values, supported by the notarial deed, the nature of the property, and local land values. In central Luxembourg City the land share is often high because land is so scarce; in peripheral communes the building share is proportionally larger. Because this split drives every year's depreciation, it is worth getting right at the outset with professional input rather than picking a number that merely feels convenient.

Is a kitchen or bathroom renovation deductible immediately or over time?

It depends on whether the work restores the property to working order or upgrades it beyond its previous standard. Replacing a worn-out kitchen with an equivalent one generally leans toward deductible maintenance in the year; a substantial upgrade that materially improves the property generally leans toward an improvement recovered through depreciation. Borderline projects are exactly where a quick check with your accountant is worth the call.

What happens if my deductions exceed my rental income in a year?

A rental activity can show a taxable loss in a given year, particularly in the early years when mortgage interest is high and a major repair lands. Subject to the applicable rules, such a loss can interact with your other income. The specifics depend on your overall situation, which is why the outcome is best confirmed for your own return rather than assumed from a general statement.

Does the accelerated depreciation rate still exist for new builds in 2026?

An accelerated regime for newer buildings has been a long-standing feature of the Luxembourg system, but its rate, the qualifying age of the building, and the number of years it applies have all been adjusted in recent budget cycles. Rather than rely on any single figure, confirm the regime and rate that apply to your specific acquisition, in writing, with your tax accountant before you commit.

Do I need an accountant to declare rental income in Luxembourg, or can I do it myself?

Many landlords with a single, straightforward property manage their own declaration. As soon as depreciation splits, accelerated regimes, mixed-use property or several units enter the picture, the professional fee is usually modest against the tax at stake — and, helpfully, the cost of that advice relating to the rental activity is itself among the deductible expenses.

Conclusion

Amortissement is not a loophole and it is not aggressive tax planning — it is simply how the Luxembourg system recognises that a building wears out, and it is one of the most valuable tools a landlord has. The owners who thrive are not the ones chasing exotic schemes; they are the ones who split their purchase price correctly, claim the depreciation they are entitled to, deduct their genuine costs, keep clean records, and confirm the moving details — above all the accelerated regime for new builds — before they commit rather than after. Do that, and the difference between the rent you collect and the income you are taxed on works firmly in your favour. If you want to look at a specific property and see what its real after-tax return looks like, that is exactly the conversation I am glad to have.

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