Affordable Housing and 2026 Tax: The 10% Green Depreciation Rate
The Luxembourg real estate market is undergoing a major turning point in 2026. Driven by the "Booster fir de Wunnengsbau" program, the government has introduced a series of powerful tax measures to stimulate construction and sustainable renovation [2]. Among these innovations, the increase of the accelerated depreciation rate to 10% for energy renovations stands out as an essential yield lever for investors targeting dynamic locations such as Schifflange and Bettembourg [1].
The New 10% "Green" Accelerated Depreciation: What You Need to Know
Since the 2026 tax year, the Luxembourg fiscal framework has heavily favored the energy transition of the rental stock. The Grand Ducal Regulation of February 13, 2026, increased the accelerated depreciation rate from 6% to 10% for investment expenditures related to sustainable energy renovation [1].
This measure specifically applies to rental housing receiving financial aid for sustainability and rational energy use (under the law of December 23, 2016) [1]. For a landlord in Schifflange renovating an old townhouse, this rate allows for the deduction of a very significant portion of the investment from taxable income in the early years, thus immediately optimizing rental cash flow.
Schifflange and Bettembourg: Fertile Ground for Affordable Investment
Why target the south of the country in particular? Schifflange and Bettembourg benefit from strong rental demand due to their proximity to Cloche d'Or and Esch-Belval. The Nextimmo portal observes growing searches for sustainable yet affordable housing in these areas.
In addition to the "green" depreciation, the government has introduced a reduced VAT rate of 8% for the creation of social rental housing [2]. This scheme imposes strict criteria:
- Maximum surface area of 120 sqm [2].
- Rents capped at a 4% yield [2].
- Leasing for at least ten years to certified eligible tenants [2].
The combination of 8% VAT and accelerated depreciation on renovations makes it possible to transform old properties into efficient and tax-profitable housing in the heart of the South's employment hubs.
The "Three Times 6" Regime for New Build Investment
For those who prefer new builds, particularly the many VEFA (off-plan) projects in Bettembourg, the "Booster" regime introduces a 6% depreciation for 6 years [2]. This measure applies up to a ceiling of 600,000 euros of construction value per building [3]. Beyond this amount, the rate returns to the standard 2% [2].
It is important to note that for the year 2026, investors still have the choice between the old and the new regime. However, starting January 1, 2027, the 6% for 6 years regime will become the only option for new acquisitions [2].
Sources
- Newsletter of March 4, 2026 - Administration des contributions directes
- Booster fir de Wunnengsbau: 7 measures to make housing affordable - taxx.lu
- A new housing package presented in committee - chd.lu