Do I pay tax on the capital gain when selling my home?
Your main residence? Exempt. Another property? It depends on how long you held it. First myth: believing every property sale is taxed. False — selling your main residence is exempt from income tax (article 102bis LIR), whatever the holding period, subject to occupation conditions. The second myth costs more: believing the reduced 10.5% rate ("quarter of the global rate") still applies. That temporary measure ended on 30 June 2025. Since then, for a property other than the main residence: sold within 5 years, the gain is a speculative gain taxed at the progressive scale (up to 42%); sold after 5 years, it is a disposal gain at the half global rate (at most 21%). An allowance of €50,000 per ten-year period (€100,000 for a couple taxed jointly) further reduces the taxable gain.
📋 The rules
- Selling the main residence is exempt from income tax (art. 102bis LIR), with no holding-period condition.
- Another property sold within 5 years: speculative gain (art. 99bis LIR), taxed at the progressive scale, up to 42%.
- Another property sold after 5 years: disposal gain (art. 99ter LIR), taxed at the half global rate, at most 21%.
- The reduced 10.5% rate (quarter of the global rate) was temporary and expired on 30 June 2025.
- A ten-year allowance of €50,000 (€100,000 for a couple taxed jointly) reduces the taxable gain.
🔓 Exceptions
- To be exempt, the main residence must be occupied at the time of sale, or have been (notably ≥ 5 years, or a sale for family or professional reasons).
- A sale to the State, a municipality or the Housing Fund may be exempt, except where a legal pre-emption right is exercised.
- An extra allowance of €75,000 exists for a property inherited in the direct line that served as the parents' main residence.
⚠️ Penalties & fines
A property capital gain must always be declared to the Direct Tax Administration (ACD) — even when exempt, the sale of the main residence is reported (form 700). Neglecting this filing, or under-stating the gain, exposes you to a reassessment, payment of the tax avoided, late interest and possible surcharges. The most common trap is believing the old 10.5% rate still applies: used wrongly, it leads to under-paying and having to regularise. Another pitfall: without evidence of the purchase price (deed, period invoices), the administration may apply a minimum acquisition price, artificially inflating the taxed gain. Finally, reclassifying a supposed "main residence" that was not one (a let property, a pied-à-terre) removes the exemption and makes the whole gain taxable. So keep deeds and invoices for as long as you own the property.
📎 Official sources
- ACD · sale of a property and the main residence (impotsdirects.public.lu) →
- Legilux · income-tax law (LIR) →
- Guichet.lu · declaring the sale of a property (official portal) →
❓ Frequently asked
Do I pay tax when selling my main residence?
No, the capital gain on the main residence is exempt from income tax, whatever the holding period. The home must, however, meet the occupation conditions, and the sale still has to be declared to the administration.
Does the reduced 10.5% rate still apply?
No, this quarter of the global rate was a temporary measure that ended on 30 June 2025. Since then, a property other than the main residence held for more than five years is taxed at the half global rate, at most 21%.
How is a property resold two years after purchase taxed?
Sold within five years, the gain is a speculative gain taxed at the progressive scale, whose top rate reaches 42%. The effective rate depends on your total taxable income for the year, since the gain is simply added to your other income.
What is the ten-year allowance?
It is an allowance of €50,000 per ten-year period, raised to €100,000 for a couple taxed jointly, which reduces the taxable gain. It is cut by any allowances already granted during the previous ten years.
What if I no longer have the original purchase deed?
Without evidence of the purchase price, the administration may apply a minimum acquisition price, which increases the taxed gain. It is therefore essential to keep the notarial deed and works invoices for as long as you own the property.
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