January 24, 2024
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 deduction is a very important deduction for entrepreneurs for income tax purposes.
Conditions
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 all years, entrepreneurs who have reached the retirement age (AOW-leeftijd) at the beginning of the calendar year can deduct 50% of the self-employed deduction.
2022: The self-employed deduction is €6,310 for entrepreneurs below the retirement age. In 2022, the tax benefit is limited to a maximum tax rate of 40%. If your income falls into a higher tax rate, such as 49.5%, you can deduct the amount at a rate of 40%.
2023: The self-employed deduction is €5,030 for entrepreneurs below the retirement age. In 2023, the tax benefit is limited to a rate of 36.93% (the rate of bracket 1).
2024: The self-employed deduction is €3,750 for entrepreneurs below the retirement age. In 2024, the tax benefit is again limited to the rate of bracket 1, namely 36,97%.
For all years, the self-employed deduction cannot exceed the profit of your business unless you qualify for the starter's deduction. In that case, this limitation does not apply.
Example 1 in 2023: You are 33 years old, meet all the conditions, and have an income of €70,000 in 2023, placing you in the highest tax bracket of 49.5%. Since you have not reached the AOW-leeftijd, your deduction is €5,030. You would theoretically pay €2,490 in tax on that €5,030 at your tax rate of 49.5%. Your tax benefit is slightly lower than €2,490 because your tax rate of 49.5% is higher than the maximum of 36.93%. Therefore, you receive a tax benefit of €5,030 * 36.93% = €1,858.
Example 2 in 2023: You are 80 years old, meet all the conditions, and have an income of €15,000 in 2023, subject to the lowest tax rate of 19.03%. Since you have reached the AOW-leeftijd, your self-employed deduction is 50% of €5,030, which is €2,515. €2,515 * 19.03% = €479 tax benefit.
Offsetting Unrealized Self-Employed Deduction
As described above, the self-employed deduction in a particular year cannot exceed the profit in that year (unless you also qualify for the starter's deduction). The portion of the self-employed deduction that you cannot use due to low profit is referred to as the unrealized self-employed deduction. This amount can be offset in your income tax return for the next 9 years. In the year you offset the unrealized self-employed deduction, you must meet the hour criterion.
Example:
In 2023, your profit before the self-employed deduction is €4,000.
You are entitled to a self-employed deduction of €5,030.
The self-employed deduction cannot exceed your profit, so in this case, your self-employed deduction for the year 2022 is limited to €4,000.
The profit after the self-employed deduction is €0.
In 2022, you have an unrealized self-employed deduction of €5,030 - €4,000 = €1,030.
In 2024, your profit before the self-employed deduction is €10,000.
You are entitled to a self-employed deduction of €3,750.
The profit after the self-employed deduction is €6,250.
There is enough room in 2024 to offset the unrealized self-employed deduction from 2023.
After offsetting, there is a remaining profit of €6,250 - €1,030 = €5,220.
The remainder of your unrealized self-employed deduction is now €0.
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.
