July 25, 2022
How can I make use of the self-employed deduction (zelfstandigenaftrek)?
Are you a self-employed person? Then you may be entitled to the self-employed deduction. The self-employed deductionis a very important deduction for entrepreneurs for income tax purposes.
You are entitled to this deduction if you meet the following conditions:
You are an entrepreneur for income tax purposes. This means you have a sole proprietorship or a general partnership and not a BV (Dutch limited liability company).
You meet the minimum number of hours criterion.
How much self-employed deduction will you receive?
The amount of the self-employed deduction changes every year. The amount is gradually reduced by the government each year, but this is partly compensated by an increased tax credit. For entrepreneurs who have not yet reached the AOW retirement age in 2022, this amount is €6,310 euros. You can deduct this amount from your taxable income. Entrepreneurs who have reached the AOW retirement age are allowed to deduct 50% of this amount. However, in 2022 the tax benefit is limited. The maximum tax rate for the deduction is 40%. If your income falls into a higher tax bracket of, for example, 49.5%, you may deduct the amount at a rate of 40%. Furthermore, the self-employed deduction cannot exceed the profit of your enterprise, unless you are eligible for the starter deduction. In that case, this limitation does not apply.
Example 1: You are 33 years old, you meet all the conditions, and you have an income of 70,000 euros per year, putting you in the highest tax bracket of 49.5%. You have not yet reached the AOW retirement age, so the deduction for you is 6,310 euros. You would actually have to pay €6,310 * 49.5% = €3,123 in taxes on this amount. Your tax benefit is slightly lower than €3,123 because your tax rate of 49.5% is higher than the maximum of 40%. Therefore, you will receive a tax benefit of €6,310 * 40% = €2,524.
Example 2: You are 80 years old, you meet all the conditions, and you have an income of 15,000 euros on which you pay the lowest tax rate of 37.10%. You have reached the AOW retirement age, so your self-employed deduction amounts to 50% of 6,310 euros, which is 3,155 euros. €3,155 * 37.10% = €1,171 tax benefit.
How do I apply for the self-employed deduction?
You do not need to apply for the self-employed deduction. When filing your income tax return, you will be asked a number of questions to determine whether you are entitled to this deduction. If you are entitled to it, the self-employed deduction will be automatically deducted from your profit.
The self-employed deduction is very useful to take advantage of. It is important to try to meet the minimum number of hours criterion to be eligible for the zelfstandigenaftrek. You can read more about the minimum number of hours criterion here.