You buy a camera for 1,800 euro. Does that amount come off your profit in full this year, or in pieces over five years? The answer decides how much tax you pay this year, and it is one of the few subjects in bookkeeping where you have nothing to choose.
This article explains where the line sits, how depreciation works, and why a year with a lot of purchases deserves a closer look.
Cost or capital asset
The rule of thumb: if something lasts longer than a year and costs more than a certain amount, it is a capital asset and you depreciate it. Stay under that threshold or use it for less than a year, and it is an ordinary cost, fully deductible this year.
In practice that threshold sits around 450 euro excluding VAT. It is a limit the Belastingdienst, the Dutch tax authority, applies in practice and it does not sit at exactly the same amount every year, so check it for the year you buy in. What does hold is the principle, and that is what you need to understand.
Two things people get wrong here. They look at the amount including VAT, so something appears to fall just above the line while it stays below. And they split a purchase to get under the line: a camera body and a lens you buy and use together as a set count together.
What a creator can deduct straight away
Under the threshold, so off your profit in one go:
- Ringlights, softboxes and most individual lamps
- Entry-level microphones
- Memory cards, cables, adapters, filters
- Tripods, gimbals and mounts
- Backdrops, fabrics, props and small set dressing
- A stream deck or capture card
Together this is often a bigger amount than creators estimate, precisely because they are separate purchases that do not feel like an investment. Collect those receipts.
What you depreciate
Above the threshold, so spread out:
- Camera bodies and better lenses
- Laptops, desktops, better monitors
- Professional lighting sets
- Furniture of substance: a good desk, an office chair
- A refit of your studio or workspace
How depreciation works
Depreciating means spreading the purchase value over the years you use the asset. You need three figures for that:
- The purchase value. What you paid, excluding VAT if you reclaim it.
- The expected useful life. For equipment and computers, five years is commonly used in practice.
- The residual value. What the asset is still worth at the end. For equipment often nil; for a good camera not always.
The annual depreciation is then the purchase value minus the residual value, divided by the useful life. There is a maximum to how fast you may depreciate, so you cannot decide to do it in two years because that suits you this year.
Buy halfway through the year and you depreciate pro rata in that first year. A camera bought in July therefore yields about half a year of depreciation, not a full one.
A worked example
In March you buy a camera for 2,400 euro excluding VAT. You assume a five-year life and a residual value of 400 euro.
Amount to depreciate: 2,400 minus 400 is 2,000 euro. Per year: 400 euro. In the first year, from March, roughly ten twelfths of that, so around 333 euro.
So a 2,400 euro purchase takes about 333 euro off your profit this year. That is why a big buying year does less for you fiscally than people hope, and why the investment allowance below matters.
The investment allowance makes the difference
Alongside depreciation there is the kleinschaligheidsinvesteringsaftrek, the small-scale investment allowance. If your total investments in a year exceed a certain threshold, you get a percentage of that total as extra deduction. On top of the depreciation, in the same year.
For creators this is more relevant than it looks. A year in which you buy a camera, a lens, a lighting set and a computer clears the threshold without effort. The threshold amount and the percentage change from year to year, so those are two figures to look up for your year.
What you have to do for it: register your investments as investments, with date and amount, and total them at year-end. Record everything as loose costs and nobody sees that you were above it.
If you sell something or start using it privately
Sell a camera that is not yet fully depreciated and you compare the proceeds with the book value. Higher proceeds are a profit. Lower are a loss. Both belong in your return, and this is an item almost nobody declares.
Start using an asset privately and you take it out of your business at its value at that moment. That is not a cost but a withdrawal.
VAT runs on its own track
Important not to mix up: the VAT on an investment is in principle reclaimed in one go, in the quarter of purchase. The income tax deduction runs over five years.
That means a camera of 2,400 euro excluding VAT already gives you roughly 500 euro of VAT back in the quarter you buy it, while the income tax deduction that year is only 333 euro. For creators charging 0% VAT on their turnover that is a structural advantage, and it is exactly why the small businesses scheme usually works out badly. See the KOR as a creator.
For certain investments the VAT deduction is tracked over several years, for instance when the use changes. That mainly applies to immovable property and less to equipment.
The asset register: one list that keeps track of everything
Everything in this article stands or falls on one document you probably do not have: a list of your capital assets. Four figures per asset:
- What it is, and when you bought it
- The purchase value, excluding VAT if you reclaimed it
- The assumed useful life and residual value
- The book value now, so after depreciation to date
Why this makes the difference. Without this list, this year's depreciation cannot be calculated, because it depends on what was already depreciated last year. The investment allowance cannot be determined, because that needs a year's investments totalled. And the profit or loss on a sale cannot be established, because that needs the book value.
We keep this list for our clients, so depreciation and the investment allowance run along automatically each year instead of someone reconstructing them.
Why a big buying year does less than expected
This is the expectation most often revised. Say in one year you buy a camera for 2,400 euro, a lens for 900, a lighting set for 1,100 and a computer for 1,800. That is 6,200 euro out of your own pocket.
Of that, 6,200 euro does not come off your profit this year. At five-year depreciation with purchases spread across the year you land somewhere around a fifth to a quarter of it, so roughly 1,200 to 1,500 euro. The rest follows in the years after.
What does sit against it in that year, and what tips the picture:
- The VAT. Reclaimed in full in the quarter of purchase, so on 6,200 euro excluding VAT more than 1,300 euro, in that same year.
- The investment allowance. With 6,200 euro of investments you are above the threshold, and that is an extra deduction on top of the depreciation.
Together, the effect in the year of purchase is larger than the depreciation alone suggests. But the idea that a big purchase reduces your tax that year by the same amount is wrong, and planning on it produces an assessment that does not add up.
Timing around the year boundary
Buy in December or in January? That makes a difference, in two directions.
For the investment allowance, the year of investing counts. If you are just under the threshold in December, a purchase you were going to make anyway, pulled into this year, can take you over it. If you are already well above, there is a level beyond which the percentage falls again.
For depreciation, the moment within the year counts: a purchase in December yields only one month of depreciation that year. For VAT, the quarter counts, so a purchase on 30 December gets you the refund in the fourth-quarter return rather than three months later.
This is not a reason to force purchases. It is a reason to discuss a purchase you were going to make in January before the year is out.
Frequently asked questions
I bought my camera before I registered. Can I still bring it in?
Often yes, at its value at the moment you start using it in your business. Keep the original receipt, because that is the basis.
I use my laptop half for business, half privately. What then?
Then you take the business share. For a capital asset in mixed use it is the percentage of business use that counts, and you have to be able to substantiate it.
Can I depreciate less in a bad year to keep some profit?
No, depreciation is not optional or something you can dose to taste. There is a system in it that you apply consistently.
What if something breaks within two years?
Then you write off the remaining value in that year. That gives a higher deduction that year. Keep the evidence that the asset is no longer usable.
In closing
The practical summary: below the threshold it is deductible this year, above it you spread it. Register your investments as investments, or you miss the investment allowance. And do not run VAT and income tax together, because the two move at different speeds.
We keep an asset register for our clients, so depreciation and the investment allowance run along every year automatically. See how we work.