Marriage, civil partnership, or cohabitation: How does it affect your taxes?

Cohabitation, registered partnership, or marriage: choosing a type of union in Luxembourg is not just a matter of personal choice. It can also have significant tax, property, estate planning, and administrative implications.

For expats and newcomers to Luxembourg, these differences can sometimes be hard to understand. Depending on your situation, your type of union can affect withholding tax, tax filing, rights in the event of separation, spousal protection, and even inheritance.

With insights from Séverine Bergé of the firm Neofisc, this page helps you compare the implications of cohabitation, registered partnership, and marriage in Luxembourg.

Why does your family situation affect your taxes?

In Luxembourg, family status can affect the calculation of income tax, tax bracket, tax return, and certain deductions.

The current system still distinguishes between single individuals, single-parent families, married couples, and certain jointly taxed partners. However, this approach is set to change with the tax reform scheduled to take effect in 2028.

To fully understand how income tax works in general, check out our guide to personal income tax in Luxembourg.

Cohabitation in Luxembourg: What Are the Tax Implications?

Cohabitation refers to living together without any specific legal formalities. It may be suitable for couples who wish to maintain a high degree of administrative and financial freedom.

Taxation of Cohabitation

For tax purposes, partners living in a common-law relationship are generally considered two separate taxpayers.

Each partner reports their own income and is taxed individually. Cohabitation does not allow for joint taxation of the couple.

This arrangement may be simple to manage, but it limits opportunities for tax pooling when the couple’s incomes differ significantly.

Assets and Inheritance in a Common-Law Relationship

Cohabitation offers little automatic protection regarding assets or inheritance. In the event of death, the surviving partner does not have the same rights as a married spouse.

It is therefore recommended to plan ahead for issues related to asset transfer, real estate ownership, or partner protection when the couple wishes to build a long-term future together.

To better understand the consequences in the event of death, consult our guide on death and inheritance tax in Luxembourg.

For whom is a common-law relationship suitable?

Cohabitation may be suitable for couples who wish to maintain complete independence, avoid administrative procedures, or avoid immediate joint tax implications.

However, it should be considered carefully if the couple has children, is purchasing real estate, or wishes to protect their partner in the event of an unforeseen life event.

PACS in Luxembourg: A Balance Between Flexibility and Taxation

A registered partnership, often called a PACS, allows a couple to formalize their relationship without getting married. It offers stronger legal recognition than a common-law marriage, while remaining more flexible than marriage.

To learn about the administrative procedures, consult our guide on registered partnerships in Luxembourg.

Tax benefits of PACS

A registered partnership may allow for joint taxation upon request, provided the conditions are met.

This option can be beneficial when the partners’ incomes are unequal. It may also allow for the pooling of certain deduction limits when filing the annual tax return.

Unlike marriage, the tax effect is not necessarily immediate on the withholding tax form. It often takes effect at the time of the annual tax return, depending on the applicable conditions.

To understand the filing procedures, consult our guide to filing taxes in Luxembourg.

Tax and Legal Limitations of the PACS

A registered partnership does not have exactly the same legal effects as marriage.

It does not automatically provide the same protections regarding inheritance, assets, or family matters. In the event of separation or death, it is therefore important to verify the rights that actually apply.

A PACS may also not immediately change the tax bracket on pay stubs. The tax implications must therefore be carefully analyzed.

For whom is a PACS suitable?

A civil partnership may be suitable for couples who wish to formalize their relationship, facilitate certain joint projects, and benefit from legal recognition without entering into the more comprehensive framework of marriage.

It may be particularly relevant for expatriate couples who wish to structure their life together while maintaining a certain degree of flexibility.

Marriage in Luxembourg: What Are the Tax Implications?

Marriage creates a legal framework that is more protective and binding than cohabitation or a registered partnership. It can have significant consequences for taxation, withholding tax, assets, and inheritance.

To learn about the administrative formalities, visit our page on marriage in Luxembourg.

Impact of marriage on withholding tax

Under the current system, marriage can change your tax bracket and thus the amount of withholding tax applied to your salary.

This change can have a significant effect on each spouse’s monthly take-home pay, especially when the couple’s incomes differ greatly.

To better understand the link between tax class and monthly withholding, see our guide on withholding tax and the tax card in Luxembourg.

Tax Filing for Married Couples

Married couples may file a joint tax return or, depending on their situation, opt for certain forms of individual taxation.

Joint taxation adds the couple’s incomes together and applies a mechanism that can be advantageous when incomes are unequal.

However, the first joint return may sometimes result in additional tax or the implementation of quarterly advance payments if the withholding tax applied during the year was insufficient.

Legal Protection and Inheritance

Marriage offers broader legal protection than cohabitation or a registered partnership, particularly regarding spousal rights, assets, and inheritance.

These implications can be particularly significant for expatriate couples, couples with children, or households with assets in multiple countries.

In the event of separation or divorce

Divorce has administrative, financial, and tax implications. In particular, it may change your tax bracket, family status, and reporting obligations.

To learn about the steps to take, consult our guide on divorce and separation in Luxembourg.

How do children affect the couple’s taxation?

Having children can affect a household’s tax situation, particularly through certain tax benefits, childcare costs, deductions, or specific family circumstances.

The consequences vary depending on the parents’ situation: married couple, registered partners, separated parents, single-parent family, or joint custody.

It is also important to properly report a birth and verify the household’s administrative information. Consult our guide on registering a birth in Luxembourg.

To better identify family expenses that may be tax-deductible, visit our page on tax deductions in Luxembourg.

Comparison: Cohabitation, PACS, or Marriage in Luxembourg

The choice of a type of union depends on your personal situation, your income, your family and estate plans, as well as your need for legal protection.

Criteria	Cohabitation	PACS / Registered Partnership	Marriage
Legal recognition	Low	Yes	Yes, more comprehensive
Immediate tax effect	No	Limited, often via tax return	Yes under the current system
Collective taxation	No	Possible upon request under certain conditions	Possible depending on the situation
Estate protection	Low	Limited	More extensive
Separation	Simple	Simpler than a divorce	More structured process
Joint real estate project	Requires careful oversight	Can facilitate certain projects	More protective framework

2028 Tax Reform: What Will Change for Couples

The Luxembourg tax system is undergoing changes. A reform calls for the introduction of a single tax bracket starting in 2028 for personal income tax.

The Luxembourg government has presented this reform as a move toward a more individualized system that is more neutral with respect to family status. Brackets 1, 1a, and 2 are expected to be gradually replaced by a single bracket, with transitional provisions for certain taxpayers who were already taxed jointly prior to January 1, 2028.

What’s changing for new couples

For couples who marry or register a partnership after the reform takes effect, the tax treatment is expected to be more individualized.

The choice between marriage and civil partnership should therefore have less direct tax impact than it does today, even though it will retain legal, asset, and estate planning consequences.

What changes for couples already taxed jointly

Taxpayers already taxed jointly prior to January 1, 2028, should be able to continue benefiting from the former Class 2 tax rate during a transitional period, in accordance with the terms set forth in the reform.

This period is intended to avoid overly abrupt changes for couples already organized under the current tax system.

Why this reform is important for expatriates

This reform is particularly important for expatriate couples, especially when one spouse has paused or slowed down their career due to international relocation.

Until the new rules take effect, however, the current rules continue to apply. It is therefore essential to consider both the short-term and medium-term implications.

Concrete example: What is the tax impact depending on the type of union chosen?

The following example, based on an analysis by Neofisc, illustrates the potential impact of the type of union on withholding tax and the final tax liability.

Let’s consider the case of two people, X and Y:

• X’s annual taxable income: 20,000 euros.
• Y’s annual taxable income: 80,000 euros.

Under the current system, the choice between cohabitation, registered partnership, and marriage can affect withholding tax during the year and the actual tax owed after filing.

Calculation of withholding tax during the year

Taxpayer	Cohabitation	Registered partnership	Marriage
X	756 euros	756 euros	3,000 euros
Y	21,091 euros	21,091 euros	9,949 euros
Total	21,847 euros	21,847 euros	12,949 euros

In this example, marriage reduces the total withholding for the year but significantly increases the withholding applied to X.

Calculation of actual tax on the annual tax return

Common-law partnership	Registered partnership	Marriage
21,847 euros	15,369 euros	15,369 euros

In this simulation, registered partnership and marriage result in lower actual taxes compared to cohabitation.

Comparison between withholding tax and actual tax

Cohabitation	Registered partnership	Marriage
Actual tax close to withholding	Refund of 6,478 euros	Additional payment of €2,420

In this case, the registered partnership results in a refund because the withholding tax deducted during the year exceeds the final tax liability. Marriage, on the other hand, results in an additional amount due, as the withholding tax was insufficient compared to the actual tax owed.

This example shows that you should not only compare the monthly net salary but also the final tax after filing.

The choice of a type of union should not be based solely on an immediate tax benefit. It also commits the couple legally, financially, and in terms of family matters.

Tax and administrative guides to consult based on your situation

• Understanding taxation in Luxembourg
• Understanding personal income taxes
• Understanding withholding tax
• Filing your tax return
• Identifying possible tax deductions
• Getting married in Luxembourg
• Registering a civil partnership in Luxembourg
• Divorce and separation in Luxembourg
• Death and inheritance tax in Luxembourg

Marriage, PACS, or common-law marriage: what you need to know

The choice between cohabitation, a registered partnership, and marriage depends on your personal, family, financial, and tax situation. Cohabitation offers flexibility, a civil partnership provides intermediate legal recognition, and marriage offers a more protective—but also more binding—framework.

In Luxembourg, this choice can also have a significant impact on withholding tax and tax returns. With the reform scheduled to take effect in 2028, taxation is expected to become more individualized. It therefore remains essential to consider both current rules and future changes.

FAQ: Marriage, PACS, Common-Law Marriage, and Taxation in Luxembourg