Back to knowledge base
Administration
Capitalise or deduct directly from profit?
Written by Ilias3 min read
With every larger purchase for your business there's a question: may I deduct this directly as costs, or must I capitalise and depreciate it? The answer determines when you get the tax benefit. This article explains how to make the distinction.
What does capitalising mean?
Capitalising means putting a purchase on your balance sheet as a business asset, and spreading the cost via depreciation over several years. You then don't deduct the whole amount at once, but a part each year. This applies to things you use for a longer time, such as equipment and inventory.
What does deducting directly from profit mean?
Deducting directly from profit means you deduct the costs fully in the year of purchase. This applies to ordinary costs you consume, such as office supplies, and to business assets under 450 euros. The advantage is that you get the tax benefit immediately.
How do you make the distinction?
The rule of thumb is: if you use something for longer than a year and it costs more than 450 euros, you capitalise and depreciate it. If you consume something quickly or it's cheaper, you deduct it directly. It's about the useful life and the value of the asset.
Why does it matter?
The distinction determines when you get the tax benefit. Deducting directly gives a lower profit this year and so less tax; capitalising spreads the benefit. Which approach is favourable depends on your profit and your plans. When in doubt about larger purchases, it's wise to coordinate this with your bookkeeper.
This article provides general information based on the rules known for 2026 and does not replace personal tax advice. For your specific situation, we're happy to take a look with you.
Looking for a bookkeeper?
Schedule a no-obligation call and find out what Fiscly can do for your business.
Ilias
