Filing US Taxes as an American Living in Luxembourg
June 26, 2025 | Country Guides | 14 minute read
Expat Tax Blog. Tax Tips for US Americans abroad.
Updated
All blogs are verified by Enrolled Agents and CPAs
All blogs are verified by Enrolled Agents and CPAsUpdated
Thinking of relocating to one of Europe’s most prosperous countries? This US–Luxembourg Expat Tax Guide breaks down what American citizens need to know about taxes while living in Luxembourg. With its high quality of life, central European location, and strong financial sector, Luxembourg is a top destination for globally mobile professionals. But it also comes with one of Europe’s highest cost of living, and high personal income taxes, so careful financial planning is key. If you’re a US expat in Luxembourg, understanding your dual tax obligations can keep you compliant while saving money on your tax liability.
Who Needs to File US Expat Taxes?
US-Luxembourg Expat Tax Deadlines
Which Filing Status is Right for Me?
US-Luxembourg Expat Tax Agreements
Luxembourg Taxes For US Expats: Navigate US-Luxembourg Expat Tax Regulations
US-Luxembourg Expat Tax Strategies to Avoid Double Taxation
Building Wealth as a US Expat in Luxembourg
US-Luxembourg Expat Taxes Made Easy with MyExpatTaxes
Who Needs to File US Expat Taxes?
Since the US taxes based on citizenship rather than residency, US citizens and green card holders are in the unusual position of having tax obligations both in the US and in the country where they live. This also applies to Accidental Americans, who may be unaware of their status as US citizens. Whether you need to file is all down to your filing status and income. In 2025, you’ll need to file your 2024 US taxes if you meet any of the following thresholds:
| Filing Status | Income Threshold |
|---|---|
| Single | $14,600 |
| Married Filing Jointly | $29,200 |
| Married Filing Separately | $5 |
| Self-Employed | $400 |
| Qualifying Widow(er) | $29,200 |
| Head of Household | $21,900 |
As a result, you may face double taxation: owing tax in the US and Luxembourg on the same income. Thankfully, there are several strategies that can help you avoid paying twice, which we’ll break down in this US-Luxembourg Expat Tax Guide.
Why Choose Luxembourg?
Luxembourg offers a high standard of living, consistently ranking among the safest and most stable countries in the world. Its modern infrastructure, clean cities, and efficient public services make daily life smooth and comfortable. The national healthcare system (Caisse Nationale de Santé) is available to anyone working legally in the country, as well as students and retirees, and provides excellent care with short waiting times at highly subsidized fees. For more extensive coverage and for those who aren’t eligible for national healthcare, private health insurance is available. The climate is temperate with cool winters and mild summers, there’s plenty of green space and forested areas for outdoor activities year-round. Multilingualism is the norm, and the country’s small size makes it easy to travel quickly across borders to France, Germany, or Belgium. For US expats seeking safety, quality care, and an international lifestyle, Luxembourg is an attractive and practical choice.
US-Luxembourg Expat Tax Deadlines
The Luxembourg tax year follows the calendar year (1 January to 31 December) and your tax return is due by the 31st December the following year.
Expats get an automatic 2-month filing extension on their US taxes. But note that tax payments are still due by April 15th to avoid late penalties.
| Deadline | Date |
|---|---|
| Standard Filing Deadline | April 15th |
| Automatic Extension for Expats | June 16th |
| Deadline for Expats Filing an Extension (file by June 15th) | October 15th |
| FBAR Deadline for Expats | October 15th |
| Deadline for Expats if you Filed a Second Extension | December 15th |
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Which Filing Status is Right for Me?
Now that you know whether you need to file a US tax return from Luxembourg, the next step is choosing the right filing status—a decision that affects your tax bracket and which deductions you can claim.
Single: If you’re not married, you’ll file as “Single.” No decisions needed.
Married to a US citizen or Green Card holder: You’ll both need to report your worldwide income—including anything earned in Luxembourg—so “Married Filing Jointly” is often your best bet for maximizing benefits.
Married to a non-US citizen or non-resident: Your spouse doesn’t need to file US taxes, so “Married Filing Separately” is typically the best route. You can elect to treat them as a US tax resident and file jointly—but that may increase your filing complexity and tax bill.
Head of Household: This option is for those who are unmarried (or considered unmarried by the IRS, such as those married to non-US citizens or residents for these purposes), pay more than half of household expenses, and have a qualifying child living with them for more than half the year. It usually offers better tax rates and higher deductions than filing as Single.
Key Forms for US Expats
As a US citizen living in Luxembourg, you’re still required to file US taxes each year, and that means staying on top of the right forms, including:
- Form 1040 – Your main US income tax return.
- Form 2555 – To claim the Foreign Earned Income Exclusion (FEIE) and reduce US tax on your Luxembourg-earned income.
- Form 1116 – To apply the Foreign Tax Credit (FTC), which can help reduce double taxation if you’re paying income tax in Luxembourg.
- FinCEN Form 114 (FBAR) – Required if your foreign financial accounts reached a combined maximum balance of over $10,000 at any point during the year.
- Form 8938 (FATCA) – For disclosing foreign accounts and assets if your total holdings are over $200,000 as a single filer.
Luckily, MyExpatTaxes supports all these forms and more. No matter how complex your tax situation, our software makes it easy to stay compliant.
US-Luxembourg Expat Tax Agreements
The US–Luxembourg Tax Treaty helps prevent double taxation and clarifies which country can tax specific income types, including employment income, pensions, and dividends. In some cases, it can reduce or eliminate withholding taxes. However, due to the Savings Clause, many treaty benefits don’t apply to US citizens—meaning the US can still tax you as if the treaty didn’t exist. Even so, the treaty is useful for defining taxing rights and it supports the use of the Foreign Tax Credit to help reduce your US tax bill.
In addition, the US–Luxembourg totalization agreement ensures you won’t pay double social security taxes on the same income, which is particularly important if you’re self employed or work across borders. You’ll typically contribute only to the country where you reside, and you may be able to combine work credits from each country to qualify for retirement benefits.
Luxembourg Visa Options
US citizens can visit Luxembourg for up to 90 days with no visa. You just need a blank page in your passport and at least 6 months remaining passport validity. However, from 2026, you’ll need to register online with the new European Travel Information and Authorization System (ETIAS), which allows travel to Luxembourg and any of the other countries in the Schengen zone for up to 90 days in any 180-day period.
For stays over 90 days, you’ll need a long stay visa, such as the Type D Visa if you have a work contract, the EU Blue Card for highly qualified workers, or the Investor Visa (for investments starting at €500,000).
After 5 years of a continuous lawful stay in Luxembourg, US citizens can apply for long-term resident status.
Luxembourg Taxes For US Expats: Navigate US-Luxembourg Expat Tax Regulations
Residence
You’ll be considered a resident of Luxembourg after a stay of 6 consecutive months, even if it spans 2 tax years or has brief absences.
Residents are taxed on their worldwide income; while non-residents are only taxed on income from Luxembourg.
Tax on Personal Income
Luxembourg has a progressive tax rate, with a personal allowance of €13,230, and tax ranging from 8%, capped at 42% on income over €234,870 (2024). An Employment Fund surcharge of 7% applies to all income, with 9% applied to income over €176,160.
In addition, Luxembourg tax rates vary according to tax class, which is determined by your family status. The three class categories are:
- Class 1: For single people, tax is calculated on your total taxable income after deductions.
- Class 2: For married people and civil partners (under certain conditions), tax is calculated on the combined taxable income of both partners.
- Class 1a: For people who receive child tax benefit, widows, and single taxpayers aged at least 65 on 1 January of the tax year, tax is calculated on your adjusted taxable income, which provides a more favorable tax calculation.
Social Security Contributions
Employees in Luxembourg contribute 2.8% for sickness and 8% for pensions, both capped at a monthly income ceiling of €13,188.96 (2025). They also pay a 1.4% dependency contribution on income, with a monthly exemption of €659.45.
US-Luxembourg Expat Tax Strategies to Avoid Double Taxation
If you’re a US expat living in Luxembourg, you might be on the hook for taxes to both countries. Thankfully, the IRS offers expat-friendly tax benefits that can lower—or even eliminate—your US tax bill.
Foreign Tax Credit (FTC)
Since Luxembourg taxes income at high rates, many expats benefit from the Foreign Tax Credit, which gives you a dollar-for-dollar credit for income tax you’ve paid locally against your US liability. The FTC applies to both earned income (like wages) and passive income (like rental profits or dividends). However, the foreign taxes must be applied to the same type of income for the credit to be used. For instance, foreign taxes paid on rental income can only offset US taxes on foreign passive income (like rental income), not earned income (such as wages).
If your foreign taxes are greater than your US liability, the excess credit can be carried back one year or carried forward for up to 10 years. To claim the Foreign Tax Credit, you’ll file Form 1116 for individual taxpayers or Form 1118 for corporations.
Foreign Earned Income Exclusion (FEIE)
Luxembourg has relatively high personal income taxes, so the Foreign Earned Income Exclusion can be a huge help. You may be able to exclude up to $126,500 of foreign-earned income from US taxes. To qualify for the FEIE, you’ll need to have a tax home in a foreign country and meet either the bona fide residence test—being a resident of a foreign country for an entire tax year—or the physical presence test—being physically present in a foreign country for at least 330 full days during any 12-month period. As the name implies, it can only be used for earned income. This means pay for personal services rendered by you, such as wages and self-employment income.
It’s important to note that even if foreign earned income is excluded under the FEIE, you’ll still need to report it on your Individual Tax Return (Form 1040). To claim the FEIE and any related exclusions or deductions, you’ll need to file Form 2555 at the same time.
Foreign Housing Exclusion
The Foreign Housing Exclusion allows you to deduct housing expenses like rent, utilities, and property insurance from your US tax bill. This can be especially helpful in a pricey country like Luxembourg. You can exclude eligible costs that exceed the IRS “base housing amount” of $20,240 per year. Note that mortgage payments are not covered by the exclusion.
To use the exclusion you must first qualify for the FEIE under either the Physical Presence or Bona Fide Residence Test, then file Form 2555 with your Form 1040. Keep receipts and lease agreements; the IRS may ask for proof. In costly areas like Luxembourg City, this break can erase a big chunk of your US tax bill by offsetting rents that routinely top €2,000 a month.
Benefits for US Families
For US expats living in Luxembourg, the Child Tax Credit (CTC) offers up to $2,000 per qualifying child under 17. Up to $1,700 of that can be refundable—even if you owe no tax. You can claim the full amount if you meet the income thresholds: under $200,000 for single filers, or $400,000 if filing jointly, and have eligible income of over $2,500. If you claim the Foreign Earned Income Exclusion (FEIE), you won’t be eligible for the refundable portion. Many expat parents choose the Foreign Tax Credit instead to unlock the full CTC refund.
Self Employment in Luxembourg
Self-employment in Luxembourg gives you flexibility, whether you’re consulting remotely or running a local business. But as a US citizen, you must still file a US tax return if you earn $400 or more from self-employment income while abroad.
You would normally owe 15.3% in US self-employment taxes but, thanks to the US–Luxembourg Totalization Agreement, you only need to contribute to Luxembourg’s social security system, the Centre Commun de la Sécurité Sociale (CCSS). Unlike employees, who are registered by their employer, freelancers and entrepreneurs in Luxembourg need to register and arrange their own coverage for health, pension, and other social protections. Once registered, you’ll be subject to contributions based on your declared income—but you’ll also benefit from state-backed healthcare and retirement rights.
Building Wealth as a US Expat in Luxembourg
Luxembourg offers a range of opportunities for growing your wealth abroad. One popular option for expats is property investment. Americans are allowed to purchase real estate in Luxembourg for personal use or rental income. However, you should prepare for some of the most expensive housing costs in Europe (averaging €11,815/m² in 2025), and stiff competition in your property search. Transaction costs typically total 8-10%, including 1.5% notary fees and a 7% registration tax, although first-time buyers are eligible for up to €20,000 discount. Properties in Luxembourg City are subject to an additional urban surtax. If you rent out your property, you’ll need to report that income on your US tax return using Schedule E.
US-based retirement accounts are another smart way to secure your future. As long as you have eligible earned income and don’t exceed the applicable adjusted gross income thresholds, you can contribute up to $7,000 per year to an IRA or $8,000 if you’re over 50. Be cautious with foreign mutual funds and ETFs; these may be classified as PFICs (Passive Foreign Investment Companies), which are heavily taxed by the IRS.
For tailored advice, MyExpatInvest offers personalized planning designed specifically for US expats. Craft your global investment and retirement strategy with an international financial consultant and secure your financial future today.
Retiring in Luxembourg
Dreaming of a peaceful, high-quality retirement in the heart of Europe? Luxembourg offers just that, with excellent public services, a stable economy, and strong pension rights for locals and expats alike. There is no official “retirement visa,” but retirees with sufficient income can apply for a residence permit for private reasons.
Luxembourg residents are taxed on their worldwide income—including pensions. Local pensions are subject to deductions for health insurance (2.8%), dependency insurance (1.4%), and income tax based on total income. These contributions support healthcare and long-term care while still providing substantial retirement benefits. US citizens who’ve worked in Luxembourg can apply for a pension under the same conditions as locals, even if they live abroad.
US-Luxembourg Expat Taxes Made Easy with MyExpatTaxes
We know the world of US-Luxembourg expat tax isn’t the most exciting topic—but what about saving money on your tax bill? MyExpatTaxes will calculate and apply the maximum tax benefits available for your unique tax situation, ensuring you pay as little tax as possible.
Our award winning software has helped thousands of expats file smoothly from abroad. Whether you want to e-file in minutes, or work with a Tax Professional for the ultimate peace of mind, we have an affordable solution for you.
Written by Nathalie Goldstein, EA
Nathalie Goldstein, EA is a leading expert on US taxes for Americans living abroad and CEO and Co-Founder of MyExpatTaxes. She contributes to Forbes and has been featured in Forbes, CNBC and Yahoo Finance discussing US expat tax.
June 26, 2025 | Country Guides | 14 minute read
