Tax19 June 20263 min read

Deducting business expenses: what is and is not allowed

Deducting expenses sounds simple, but the rules differ per type of expense and there is more nuance to it than you might think. What exactly can you deduct, how does it work with costs that are partly private and partly business, and which receipts do you need to keep? This article sets out the key rules.

Which costs are deductible in principle?

As a rule of thumb: costs you incur to generate income from your business are deductible. Think of software, tools, office supplies, advertising and phone costs that you use for business purposes.

Advisory costs, such as a bookkeeper or lawyer, and insurance specifically related to your business also fall under this. The idea is always the same: without this expense, you could not have done your work.

Purely private expenses, such as groceries for home, are never deductible, even if you happened to be working at that moment. The link to your business has to be demonstrable.

How does a home workspace work?

If you work from a room in your own home, strict conditions apply before you can deduct costs for that workspace. An important criterion is often whether the space has an independent character, for example with its own entrance, and whether you earn a substantial part of your income there.

If your workspace does not meet these conditions, you generally cannot deduct housing costs, but you can often still deduct a portion of smaller costs such as internet or a desk that you use specifically for business.

This scheme is nuanced and differs per situation (rented home versus owned home, sole trader versus private limited company). So check the current conditions with the Belastingdienst or consult an adviser before applying it.

What applies to transport, equipment and training?

You can often deduct business trips in your own car via a fixed amount per kilometre, or you keep track of the actual car costs if you use the car (almost) entirely for business. Watertight mileage records are essential here.

Equipment such as a laptop, phone or camera that you use for business is deductible. Above a certain purchase amount, you usually have to depreciate these costs over several years rather than deduct them all at once, this is called depreciation.

Courses and training that directly contribute to your current profession are deductible, while training for an entirely new profession is often treated differently. If in doubt, check the rules on training costs with the Belastingdienst.

How do you handle receipts and mixed costs?

Always keep the original receipt or digital invoice for every business expense, even small amounts. Without proof, the Belastingdienst can refuse a deduction, regardless of whether the expense was logically a business one.

For mixed costs, where you use something partly for business and partly privately (think of a phone plan or home internet), you may only deduct the business portion. Apply a reasonable, well-founded split here, for example based on usage.

A photo of a receipt taken right after purchase, linked to the correct cost category in your bookkeeping system, keeps you from ending up with a stack of unreadable till receipts at the end of the quarter.

What mistakes do entrepreneurs make most often with expense deductions?

A common mistake is deducting mixed costs in full, while only the business portion is allowed. This tends to stand out relatively quickly during an audit and can lead to an additional tax assessment.

We also often see costs for an investment deducted all at once, when they should really have been depreciated over several years. This affects both your profit and your tax return.

Simply losing receipts is perhaps the most common mistake of all. A system where you capture receipts digitally right away, such as TelMaar offers, prevents you from missing out on deductions afterwards because the proof is missing.

Frequently asked questions

Can I deduct the full cost of my home internet subscription?

No, only if you use the internet exclusively for business. If you also use it privately, you deduct only the business portion based on a reasonable estimate.

Do I need to keep every receipt, even small amounts?

Yes, every piece of proof for a business expense is needed to support the deduction during a possible audit, regardless of the amount.

Can I deduct a laptop in full at once?

That depends on the purchase amount. Above a certain threshold, you generally have to depreciate the cost over several years. Check the current threshold with the Belastingdienst.

This article is general information, not tax or legal advice. When in doubt, consult an adviser; rules can change.