As a self-employed person or sole proprietor, you pay income tax on your profit, and that profit is your turnover minus your business expenses. The more costs you rightfully deduct, the lower your taxable profit. At the same time, "what may I deduct and what may I not" is one of the most frequently asked questions to a bookkeeper, especially for costs that are partly business and partly private. In this article we set out the main rules and the most important categories.
Short answer
Business expenses are costs you incur within reasonable limits for your business, and these you may deduct from your profit. Purely private costs are never deductible, and for costs you use both for business and privately, such as a phone or a car, you may only deduct the business portion. Separate, restrictive rules apply to entertainment expenses such as client gifts and business meals. If in doubt about a specific cost item, it is wise to discuss it with your bookkeeper, because the outcome often depends on the precise situation.
Business versus private: the basic rule
The Tax Authority takes as its starting point that business expenses are the costs that, within reasonable limits, are necessary for carrying out your business. If you buy a laptop solely to work with, that is in principle a business expense. If you buy a bicycle for your children, that has nothing to do with your business and is therefore never deductible, even if you were to pay for the bicycle through your sole proprietorship.
It becomes trickier with costs that at first glance look business-related, but where a personal benefit also plays a role, such as a course you find interesting but which is only loosely related to your profession. The Tax Authority then looks at the actual business interest: is the course relevant to your work, and would a reasonably acting entrepreneur have incurred these costs too? If you can plausibly demonstrate that, the cost item is deductible.
Mixed costs: partly business, partly private
Many cost items for a self-employed person are not one hundred percent business. Think of a phone you use both for clients and privately, or a car with which you both drive to clients and do the groceries. For this kind of mixed cost the rule is: only the business portion is deductible. In practice this means you must make a realistic estimate of the ratio of business versus private use, and you must also be able to substantiate that ratio.
An example: a self-employed person buys a phone subscription of 40 euros a month and uses the device for an estimated 70 percent business and 30 percent private use. Of the monthly costs, 28 euros is then deductible as a business cost item. For a car that you use both for business and privately, things work slightly differently: here the rules around private use of the car and any addition to income (bijtelling) come into play, and these rules are so specific that it is wise to have them calculated per situation with your bookkeeper rather than working from a general rule of thumb.
It is important that you can substantiate the business/private split, for example with a mileage log for a car, or with a logical estimate based on your activities for other mixed costs. An estimated ratio "because it roughly matches" is vulnerable in an audit; try to substantiate your estimate as much as possible with concrete data.
Entertainment expenses: client gifts and business meals
For a number of cost items related to entertainment, such as client gifts, business meals and certain costs for conferences or study trips, separate, restrictive rules apply in income tax. For 2026, a threshold of 5,700 euros applies here: costs in this category are only deductible to the extent that, combined, they exceed this threshold amount. As an alternative to this threshold, you may also choose to deduct 80 percent of these costs, without applying the threshold. Which of the two methods is more advantageous depends on how much you have spent on entertainment expenses during the year, and that is something your bookkeeper can calculate for you. Note: for corporate income tax (i.e. for a BV), a different percentage applies, namely 73.5 percent, and partly different rules apply than in income tax.
A business dinner with a client generally also falls under this restricted deduction. In addition, it is often not possible to fully reclaim the VAT on this kind of consumption and entertainment expenses: for certain hospitality and entertainment costs, additional restrictions apply to VAT deduction. Because these VAT rules are quite nuanced and can differ per situation, we recommend discussing this per case with your bookkeeper rather than relying on a fixed rule of thumb.
Common deductible items at a glance
Besides the special categories above, there are cost items that most self-employed people will recognise. A few common examples:
- Office supplies: think of paper, pens, a printer or other small office items you use for your work.
- Software and subscriptions: bookkeeping software, a design program, cloud storage or trade-specific tools you use for business.
- Travel costs: costs for travelling to clients, suppliers or trade fairs, for example by public transport, or a business mileage rate if you travel with your own vehicle.
- Training costs: courses and training that maintain or expand your professional knowledge within your current profession.
- Home workspace: under certain strict conditions you can deduct costs for a workspace in your own home, see below.
- Trade literature and subscriptions to trade journals directly related to your profession.
- Insurance specifically aimed at your business, such as professional liability insurance.
For most of these items the main rule simply applies: fully deductible if the costs are entirely business-related, partly deductible if there is also a private component involved.
Note: besides the regular cost deduction, there is also a separate scheme for investments in business assets, such as machinery, a company vehicle or expensive equipment. If in one year you buy business assets worth more than a certain amount, you may, besides the normal depreciation, also be able to apply the small-scale investment deduction (KIA), an extra deduction on top of the costs themselves. This scheme has its own amounts and percentages that are set annually, and is therefore something different from the cost deduction that is central to this article. If you are considering a larger investment, discuss with your bookkeeper whether the KIA applies in your situation.
Home workspace: a notoriously tricky deduction
The deduction for a workspace in your own home is one of the most nuanced parts of cost deduction, and unfortunately there is no simple rule-of-thumb percentage that applies to everyone. The Tax Authority first looks at whether your workspace is an "independent workspace": a space that is clearly distinguishable from the rest of the home, for example with its own entrance or its own sanitary facilities, and which could in principle also be rented out to a third party. A desk in the corner of the living room or a bedroom you use as a workspace does not in principle count as an independent workspace.
If your workspace is not independent, the costs for it are, for a rented home, in practice almost never deductible. For an owner-occupied home the possibilities are different, and depend, among other things, on whether the home (partly) belongs to your business assets. If your workspace is independent, other, equally strict conditions apply before you can actually deduct costs. Because this scheme depends so much on the layout of your home, whether you rent or own, and how intensively you use the space for business, we strongly recommend having your specific situation assessed before including home workspace costs in your tax return.
Common mistakes when deducting business expenses
A common mistake is fully deducting mixed costs while a private component is also involved, for example the entire phone bill instead of only the business portion. Another mistake is the absence of substantiation: keeping a receipt is a good start, but for questionable cost items it helps to also briefly note why the costs were business-related, especially if the connection is not immediately obvious. We also regularly see entrepreneurs fully deduct costs for entertainment or a home workspace without further substantiation, while precisely stricter rules apply there. Conversely, it also happens that entrepreneurs, out of caution, simply leave costs that are actually deductible unclaimed, for example small business purchases they don't consider "important enough" to record.
What should you do as a self-employed person?
Keep your administration up to date throughout the year instead of only at tax return time, and keep receipts and invoices organised, preferably digitally in your bookkeeping software. For mixed costs and less obvious business expenses, briefly note why the costs are business-related, so you can substantiate this in the event of an audit. If you are unsure about a specific cost item, it is better to ask your bookkeeper in advance than to discover afterwards that a deduction turned out not to hold up, or that you left costs unclaimed that were in fact deductible.
Frequently asked questions about business expenses and deductions
Can I deduct my entire phone bill if I also use the phone privately?
No, with mixed use you may only deduct the business portion of the costs. Make a reasonable estimate of the business/private ratio and keep this estimate consistent.
Are the costs of a business dinner with a client fully deductible?
Usually not fully. This kind of entertainment expense falls under the restrictive rules for entertainment, where you can choose between a threshold amount or a percentage of the costs. In addition, the VAT on this kind of consumption is often not fully reclaimable. Discuss this with your bookkeeper if in doubt.
Can I always deduct my home workspace as a self-employed person?
No, this is one of the strictest deduction schemes. Only with an independent workspace that is clearly distinguishable from the rest of the home, and under additional conditions, might you qualify. Always have this assessed specifically for your situation.
Do I need to keep a receipt for every business expense?
Yes, keep receipts and invoices for all your business expenses, even small amounts. In an audit by the Tax Authority you must be able to substantiate your cost items, and a missing receipt can lead to a cost item being disallowed after all.
Does what is deductible change every year?
Certain amounts and thresholds, such as the threshold for entertainment expenses, are regularly adjusted. The main rules, such as the distinction between business and private, generally stay the same. If in doubt, always check the current amounts for the current year.
Want to know more about which costs you may deduct in your situation? Take a look at our bookkeeping for the self-employed and sole proprietorships or our frequently asked questions for more background information.
Want to know more? See the official information from the Tax Authority on business expenses and the Chamber of Commerce (KVK) on being self-employed.
