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Expenses and deductions

Capture the receipt while the purchase is still fresh.

Updated
Sources reviewed
Tax year
2026

A business expense is deductible from business income if it is incurred to earn, secure and maintain the income (Article 31 of the Income Tax Act) and is backed by a voucher. Personal costs are not deductible, and mixed costs such as phone, car and home office are deducted in proportion to business use with a justification. Vouchers must be kept for seven years. On the VAT register, input VAT on the same costs is deducted on the VAT return.

Key figures

Condition
to earn, secure and maintain income
Article 31, Income Tax Act
Vouchers
kept for 7 years
Mixed costs
business-use share
Input VAT
deducted on the VAT return
if VAT-registered

A receipt records what you bought. A useful note explains how it relates to your work. Keeping both makes an expense easier to review later.

The business connection matters

Business-expense deductions depend on the connection to earning income and the conditions set by law. Buying something during the working day does not automatically make it deductible. Income Tax Act, Article 31.

Separate recording a purchase from deciding its tax treatment. Saving the evidence and adding a question to an unclear entry is useful even when you cannot resolve it immediately.

A simple routine for each purchase

  1. Keep a readable receipt or invoice.
  2. Add a short note explaining its connection to the project or business.
  3. Flag any personal use as well as business use.
  4. Review the date, amount, currency and possible duplicates.
  5. Collect uncertain items for your next review with an adviser.

Accounting records must be supported by reliable evidence that can be traced to the transaction. Skatturinn: bookkeeping.

AI helps with the data entry

With Invoicing + Expenses, Fustle can extract information from a receipt using AI. You review the result, correct anything necessary and confirm the entry. Extraction does not decide whether an expense or its VAT is deductible.

The service organises expense records and supports calculations. You handle filings on this plan. Payroll adds the filings agreed within your selected service.

Quick answers

Is every receipt deductible? No. The nature of the purchase and the applicable rules determine its treatment.

What if the AI reads a detail incorrectly? Correct it before confirming. The original receipt remains important for checking the entry.

Is a VAT deduction the same as a business-expense deduction? No. Read the separate VAT guide.

Explore Invoicing + Expenses

Sources checked 23 September 2026. General guidance; individual expenses must meet the relevant deduction conditions.

Frequently asked questions

Can I deduct costs I paid before registering the business?

Costs directly connected with preparing and starting the business can be deductible if vouchers exist and the link to earning income is clear. Record them with the start date and an explanation.

What about a computer or equipment above a certain price?

More expensive assets are capitalised and depreciated over several years instead of being expensed in the year of purchase. Skatturinn publishes a threshold for smaller assets that can be expensed immediately.

Are meals and clothing deductible?

Generally not, as they are personal costs. Exceptions are protective and work clothing that has no use outside work, and per diems or travel costs for the business within Skatturinn's limits.

Sources

General information, not advice on your situation. Skatturinn and other authorities assess each case. Check the review date and sources before relying on a figure.

Where does Fustle fit in?

Record the work and create the invoice. The service you choose determines the support included.

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