The hours criterion: the 1,225-hour rule for the self-employed deduction

The self-employed deduction and the starter deduction together quickly add up to thousands of euros in tax benefit. The key condition: the hours criterion. You must spend at least 1,225 hours per year on your business. Here is how it works, and how to substantiate it.

What is the hours criterion?

To qualify for the self-employed deduction, the starter deduction and the co-working deduction, you must spend at least 1,225 hours on your business in a calendar year. That is roughly 24 hours a week, all year round. Fail to meet it and these deductions lapse, even if you are otherwise a solid entrepreneur.

Which hours count?

All hours you spend on your business, not only the ones you bill to clients. So also:

• sales: writing quotes, networking, updating your website;
• administration: making invoices, your VAT return, your bookkeeping;
• travel time to clients;
• study and training related to your work.

Those non-billable hours often make the difference between meeting the criterion and falling short. Count only your billable hours and you easily come up short while in reality you work far more on your business.

Note: no reduction pro rata

A common misconception: the hours criterion is not reduced pro rata if you start halfway through the year. Start in October and the full 1,225 hours still apply. Tricky for starters, so track your hours from day one.

There are two exceptions. If you are partly incapacitated for work, a reduced criterion of 800 hours applies in some cases. And during pregnancy the non-worked weeks around the birth (up to 16 weeks) count as if you had kept working.

How do you substantiate your hours?

The burden of proof is on you. In an audit the Tax Administration asks for an hours record, and "I really work full-time" is not evidence. What helps:

• an hours record where you log daily what you did, billable and non-billable;
• that record kept up during the year, not reconstructed afterwards;
• supporting evidence such as calendar appointments, quotes and invoices that back up your story.

A record you cobble together after the audit letter almost always falls apart.

Calculate your benefit

What the deductions yield net depends on your profit. With the net income calculator you see instantly what the self-employed and starter deductions mean for you. More on the amounts and the other deductions in tax deductions for freelancers.

In Finq you track your hours in a calendar: click a day, pick your project and enter your hours. That way you build the hours record you need in an audit without extra work. See how time tracking works.