A system may include computing equipment and a handheld video overlay accessory. A video overlay accessory may include one or more light sources, an image sensor, and processing circuitry. The video overlay accessory may include an image projector that projects images onto external objects. The video overlay accessory may include a partially transparent beam splitter and a display that projects display content onto the partially transparent beam splitter. A user that views a scene through the partially transparent beam splitter may view the display content apparently overlaid onto the scene. Light sources in the video overlay accessory may be laser diodes or other light-emitting diodes that project tracking spots such as infrared tracking spots on to external objects. The image sensor may be used to capture images of the tracking spots. The processing circuitry may determine distance and position information based on the captured images.