While measuring the impact of indexation on gross income (+2.5%), or even the energy tax credit (up to €84 net per month depending on income), is easy, the consequences of adjusting the tax scale require more precise calculations.
The ministry of finance has therefore submitted a list of concrete examples following this measure, which is provided for in the tripartite agreement signed on Tuesday 7 March. As a reminder, the adjustment of two and a half tranches, i.e., 6.25% (one tranche representing 2.5%), has been agreed for 2024. In the meantime, for 2023, a tax credit will be put in place--retroactive to 1 January--to compensate for the equivalent of two index brackets.
€245 in 2023 for a single person earning €3,000 per month
Thus, a young single person without children (tax class 1), who earns €3,009.92 gross per month, i.e., €36,119 per year, will recover €245 in 2023, thanks to the tax credit. And €285 in 2024 after the adjustment.
If they earn €60,000 per year, the annual gain will be €525 in 2023 and €705 the following year.
If we look at a family with one child, tax class 2, with one person earning €3,750 per month and the other €3,000, the gain will be €620 in 2023 and €645 in 2024.
A single-parent household (tax class 1a) with a gross annual income of €50,000 will gain €450 in 2023 and €755 in 2024.
And a retired couple (tax class 2), one of whom earns €70,000 per year and the other nothing, will have an extra €525 in 2023 and €555 in 2024.
Up to €2,580 with a mortgage
The finance ministry has also taken the case of families with a mortgage to calculate the impact of the increase in the ceiling on deductible interest, another measure of the tripartite.
A couple with incomes of €5,500 and €4,000 per month each, with two children and a mortgage, will pocket an extra €2,460 this year and €2,580 the next. The ceiling for their deductible interest will be raised from four times €2,000 to four times €3,000.
The annual gain falls to €1,590 in 2023 and to €2,025 in 2024 for a couple with one child and a single monthly gross salary of €8,333.33. The ceiling for their deductible interest increases from three times €2,000 to three times €3,000.
Only part of the potential gains
The ministry of finance states that it has made an “annualised calculation based on the salary on 1 April 2023 (after the postponed index of July 2022) and without any subsequent index bracket.” Thus, the gain could be higher if we take into account the fact that another indexation of salaries is planned for the end of 2023. But one should not forget to reduce the monthly salary for the months of January to March, when the gross salary is lower because the delayed indexation from July has not yet fallen.
Also not taken into account are the effects of indirect tax measures (“bëllegen Akt”) or energy measures, the social compensation of the CO2 price by means of a specific tax credit from 1 January 2024, or all other direct aid to which the taxpayer may be entitled.
When questioned by several media, the OGBL confirmed the accuracy of the ministry of finance’s calculations. The LCGB also told L’Essentiel that it was in the process of making its own calculations. And MP Sven Clement (Piratepartei) considered them “credible.”
This story was first published in French on Paperjam. It has been translated and edited for Delano.