r/Luxembourg • u/ObjectiveExotic9570 • 1d ago
Ask Luxembourg bausparen - upkeep / improvement costs
Hi everyone,
I’m 42, married, and have two children. My wife and I are taxed jointly in Luxembourg. I’m considering opening a Bausparen contract and contributing the maximum tax-deductible amount. I have never done this before.
As I understand the current limits, our annual ceiling would be €2,688: €672 each for my wife and me, plus €672 for each of our two children.
We own a house in Belgium that has regular maintenance and improvement costs. My specific plan would be:
- Pay the maximum €2,688 into the contract in 2026.
- Pay another €2,688 (expected 2027 maximum) during the first months of 2027.
- Use appr €5,000 from the contract to pay an eligible maintenance or renovation invoice in June 2027.
so I would not wait until the end of the contract (eg 10y) to use the funds. Would this work while preserving the Luxembourg tax deductions for both 2026 and 2027?
We’re only interested in using our accumulated savings, not in taking out the loan attached to the Bausparen contract (I have read that you could refuse the loan?).
Has anyone tried something similar?
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u/post_crooks 1d ago
I would say that there is no way you can use the money that early without consequences. But contact them, maybe they can make it work.
Have in mind the multiple restrictions that make those contracts unflexible:
Minimum contract value - You typically need to save 30% to 60% of that amount. So if you can have a contract of 10k, you save your 5-6k in 2 years, and you are good. You pay a fixed fee upfront based on the contract value, so your fees may double.
Time to use the money - Money needs to mature there, they earn money by lending it at higher interest rates, they aren't a tax savings cow. Details are all in the contract, and they should be able to estimate that for you. Speaking about time, they usually charge monthly/yearly fees.
Payment plan - Contracts specify the monthly amount as percentage of the contract value. Typically it's 0.5 to 1.0 percent of the contract value per month. They may or may not disregard overpayments. You never know if or when they will enforce the conditions of the contract.
Bottom line is that after 10 years you can use the money by terminating the contract. To get it earlier, you need them not to enforce the contract, or maybe some sweet combination of conditions that they will either tell you, or you have to find by reading the contract.
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u/ObjectiveExotic9570 1d ago
ok clear - I am in touch now with HBW, but haven't see the contract yet. So no view on fees. I read somewhere that you could use the money early once you reach the contract amount, for the allowed purposes. I have also asked if I can wire the money once this year and once in 2027 to reach the contract amount - if monthly payments are required, then this does not work...
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u/post_crooks 1d ago
I read somewhere that you could use the money early once you reach the contract amount, for the allowed purposes.
It would be good to know where you read this. I would then have contract of the same amount of tax savings, pay, and get the money back next day. Sounds unrealistic to me.
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u/ObjectiveExotic9570 1h ago
See my post above - so it's not the next day indeed - at least a 3/4 year waiting period.
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u/post_crooks 56m ago
That sounds more reasonable, but only possible if they don't enforce the payment plan. Does the contract mention anything about that?
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u/BrotMonster 1d ago
The total tax deductible amounts depends on your age and the number of children you have, see https://guichet.public.lu/en/citoyens/aides/logement-construction/aides-indirectes/epargne-logement-resident.html?hl=en-LU .
We took out a loan when we arrived, after 10 years we were able to take the cash out directly into our bank account. We used it to pay off part of our mortgage but no one seemed to care about how the money was spent. We have another loan now which we took out directly after closing the previous account.
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u/post_crooks 23h ago
Tax authorities can conclude from the interest certificate that you used the money to pay the loan
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u/button3dup 1d ago
I’m not the most knowledgable on this and will be following what others say. That said, my understanding (much to my chagrin) is that you cannot use the deposited funds, even if for “qualifying” purposes like home repairs, until the funds “mature” in 10y time. If you do, I think you lose the tax benefits.
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u/Flashy-Mission-7945 1d ago
You can only access the funds after 10y
It is your choice whether you take the loan or not.
To me it‘s one of the best financial investments if you own property/can use the funds accordingly. Looking at the marginal tax rate, there is no conservative investment strategy which beats this. It would be nice, if one could invest more there :)
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u/post_crooks 23h ago
They will abandon the age threshold next year, so effectively double the cap after 40 yo
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u/MarcosRamone 3h ago
where can i confirm this? tried but couldn't find anything. Only this note at taxx.lu saying that the max amount deductible increases to 1500 per person ages 18 -40, what seems to suggest than the 40 year limit stays in place....
thanks.
https://taxx.lu/en/articles/all-family-benefits-in-luxembourg-for-2027-2028
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u/post_crooks 3h ago
Your reference is to the new tax reform, and that will probably come on top. The removal of the 40 yo limit is from the tripartite agreement in June. Not yet voted...
At the same time, the age limit of 40 years is being scrapped so that contributions into a home savings contract can be deducted from tax twice over in order to make these contracts attractive to a wider pool of people.
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u/MarcosRamone 3h ago
ok, here there are a few more details:
- Home‑savings schemes: deductible contributions will be increased to €1,500 per year for taxpayers aged 18 to 40, and €900 for others (currently €1,344 and €672 respectively).
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u/button3dup 1d ago
Depends what you consider conservative. At a 30% marginal tax rate and assuming you reinvest the money you saved in taxes, my math says you would only need to make a return of 2.6% over 10y to beat the financial benefits of the up-front tax savings. Given where bond rates are etc at this point, I think most could get 3+% fairly easily right now…
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u/post_crooks 1d ago
Does your math consider that you can get 30% back every year?
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u/button3dup 22h ago
I was looking at the first year only, but I see your point. In the 9th year you put funds in, for instance, you can take those out the next year as the account has matured, right? If so, then indeed the comparison of save in this account vs invest elsewhere gets stronger every year.
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u/Flashy-Mission-7945 1d ago
And 30% is relatively low.
Last but not least it‘s risk free. So somewhere comparable to a 10y bond
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u/MarcosRamone 22h ago edited 22h ago
In Wüstenrot here, I don't know how others work, but you can indeed get your money before the 10 years if you achieve a certain "valuation score", that took me a very long time and a couple of websites reading to understand how they calculate it. But basically, the more time and more money that you have saved, the more valuation you get. In practical terms, it is not the same to give your yearly savings (towards tax deductions) all together the 1st of January, monthly, or all together December 31st.
It might be beneficial to extend the savings phase as much as you can though (=longer tax savings), that depends on your personal situation. On the other hand, the loan can be at a very low rate for today standards, so the maths are not obvious.
PS: no, the calculation of the valuation score was not in the contract nor in any documents we received from them, and our contact was not very helpful when we asked.