2026 Tax Scale: Marginal Rate and Average Rate
Skimming?
We've prepared the shortcut for you.
Your taxable income is divided into brackets, each taxed at its own rate. Crossing a threshold only increases the tax rate on the euros above it. The average rate remains much lower than the marginal rate because your first euros are taxed at 0% or close to it. Tax is then increased by 7% for the employment fund, and then your tax credits are deducted. The result: tax-wise, a pay raise increases your net salary, only more slowly than your gross salary.
This is for you if
- You are hesitating to accept a bonus or a pay raise for fear of 'moving up a tax bracket'.
- You want to understand the tax line on your payslip.
- You are comparing two gross job offers.
- Cross-border worker: this tax scale applies to your salary taxed in Luxembourg; if you are treated as a resident (assimilated), your foreign income is only used to set your tax rate (ACD).
Not for you if you are looking for your exact tax after deductions: use a calculator instead.
Key figures
| Item | Figure | Years |
|---|---|---|
| Untaxed income (Class 1) | up to €13,230 | 2025 and 2026 |
| First rate | 8% | 2025 and 2026 |
| Maximum scale rate | 42%, above €234,870 | 2025 and 2026 |
| Employment fund | + 7% of tax | 2025 and 2026 |
| Employment fund, high earners | + 9% above €150,000 (Classes 1 and 1a) or €300,000 (Class 2) | 2025 and 2026 |
| Maximum marginal rate, including employment fund | 42% × 1.09 = 45.78% | 2025 and 2026 |
| Reduction of employee tax credit (CIS) and CO2 tax credit (CI-CO2) between €40,000 and €80,000 gross | 1.5 cents + 0.54 cents less per additional gross euro | 2026 |
Class 1 tax scale, by taxable income bracket (years 2025 and 2026, ACD scale (ouvre dans un nouvel onglet)):
Marginal rate vs. average rate: what is the difference?
The marginal rate is the tax rate of your highest bracket: what tax takes on your next euro. The average rate is your total tax divided by your taxable income: what tax actually costs you. At trigger, we use the first one to make decisions (bonuses, extra hours, deductions) and the second one to compare.
Average rate in Class 1, including employment fund, before tax credits (trigger calculation using ACD 2025 scale formulas, valid in 2026):
| Taxable income | Annual tax | Average rate | Marginal scale rate |
|---|---|---|---|
| €30,000 | €2,137 | 7.1% | 18% |
| €50,000 | €7,854 | 15.7% | 36% |
| €80,000 | €20,291 | 25.4% | 39% |
| €120,000 | €37,011 | 30.8% | 40% |
| €250,000 | €94,420 | 37.8% | 42% |
Class 1a (single parent or person aged 64 and over) and Class 2 have their own calculation rules: an adjusted calculation in Class 1a, splitting in Class 2 (twice the Class 1 tax on half of the couple's adjusted taxable income); to find out which one applies to you, read our guide on tax classes.
Calculate your tax using the scale in 4 steps
Start from your taxable income, not your gross salary
Deduct social security contributions, job-related expenses (professional expenses: minimum lump sum of €540 per year), special expenses (deductible private expenses such as insurance or savings: minimum lump sum of €480), and your tax allowances (amounts deducted from your taxable income) from your gross salary, according to ACD form 164 R 2026. To reduce your tax base, check out our deductions checklist.
Apply the formula for your bracket
The ACD publishes a formula for each bracket: tax = income × rate - deduction, rounded down to the nearest euro. For the 36% bracket: 0.36 × income - €10,658.70.
Add the employment fund
Multiply by 1.07 up to €150,000 of taxable income (Classes 1 and 1a; €300,000 in Class 2). Above that, in Class 1, the ACD adds tax × 9% - €931.80 (the deduction differs in Classes 1a and 2), a formula that prevents any sudden jump when crossing the threshold.
Deduct your tax credits
Employee tax credit (CIS), CO2 tax credit (CI-CO2), single-parent tax credit: these are deducted from tax, euro for euro (amounts in our guide). Your monthly withholding is only an advance: any overpayment can be recovered through an annual adjustment (the simple adjustment of tax withheld on your salary, model 163) or through a tax return (model 100).
A worked example
Let's take Léa, single in Class 1, with €50,000 in taxable income in 2026.
- Bracket: €49,500 to €51,795, 36% marginal rate.
- Scale tax: 0.36 × 50,000 - 10,658.70 = 7,341.30, i.e. €7,341.
- Employment fund: 7,341 × 1.07 = 7,854.87, i.e. €7,854.
- Average rate: 7,854 / 50,000 = 15.7%. Marginal rate including employment fund: 36% × 1.07 = 38.52%.
Another case in 2026: Léa has €51,750 in taxable income and receives a bonus that brings her taxable income to €51,850: she crosses the €51,795 threshold and moves into the 38% bracket.
- Before: 0.36 × 51,750 - 10,658.70 = 7,971.30, i.e. €7,971, then × 1.07 = €8,528.
- After: 0.38 × 51,850 - 11,694.60 = 8,008.40, i.e. €8,008, then × 1.07 = €8,568.
- On €100 more, tax takes €40. Léa keeps €60.
Her first €51,750 is not re-taxed at 38%. At trigger, we still see employees refusing a bonus for fear of moving up a bracket: this calculation shows that turning it down costs them money.
What the scale doesn't tell you
The scale alone doesn't explain your entire net salary:
- Tapering tax credits: between €40,000 and €80,000 in gross salary, the CIS loses 1.5 cents and the CI-CO2 0.54 cents per additional gross euro (ACD, 2026). Your effective marginal rate rises by about 2 percentage points.
- Means-tested benefits: certain benefits depend on an income cap. These benefits, not the tax system, are what can create a cliff effect.
Common mistakes
- Applying the marginal rate to your entire income to estimate your tax.
- Thinking in terms of gross salary: the tax scale applies to taxable income, after contributions and deductions.
- Forgetting the employment fund (+ 7%) when estimating your net salary.
- Forgetting tax credits, which reduce tax euro for euro.
- Using an outdated tax scale: the brackets changed on January 1, 2025.
What could change
- 2027 tax scale: Bill No. 8775, submitted on June 22, 2026, provides for adjusting the scale by an index bracket on January 1, 2027 (brackets multiplied in principle by 1.025) and a temporary economic situation tax credit for the period from June to December 2026. As of October 9, 2026, this bill is still in committee and has not been passed: nothing is guaranteed.
- Single tax class in 2028: Bill No. 8676, submitted on January 6, 2026, would replace Tax Classes 1, 1a, and 2 with a single tax class: automatic switch for Classes 1 and 1a, a 25-year transition for households currently in Class 2. In committee in September 2026, not passed.
As long as these bills are not passed into law, the tax scale on this page applies.
Frequently asked questions
Not because of income tax: only the portion above a threshold is taxed at the higher rate, and the marginal rate caps at 45.78% including the employment fund. A cliff effect can come from a means-tested social benefit, not from the tax scale.
It is an increase on your tax, not on your income: 7%, or 9% above €150,000 of adjusted taxable income (€300,000 in Class 2). It is already included in the ACD wage withholding tax tables, so it is already reflected in your monthly withholding.
No: the scale in force since January 1, 2025 also applies in 2026 (ACD). What changes in 2026 is the CI-CO2, which increased from €192 to €216 per year for salaries up to €40,000.