Disclaimer: This blog post is for informational purposes only and does not constitute professional tax advice. The information provided is based on general understanding and publicly available resources related to the White Return (白色申告) system in Japan. Tax laws and regulations are subject to change, and individual circumstances can vary significantly. It is strongly recommended that you consult with a qualified tax professional (税理士) in Japan for personalized advice tailored to your specific situation.
Tax Deductions for Freelancers (White Return in Japan)
Freelancers in Japan filing under the White Return (白色申告) system can deduct a wide range of business expenses (必要経費) to reduce their taxable income. There is no fixed upper limit on claimable expenses, as long as they are legitimately related to your business and properly documented . Below is a comprehensive list of deductible expenses and guidance on how to calculate partial deductions (e.g. for home office use), followed by best practices for tracking and documenting these expenses to stay compliant with Japanese tax regulations.
Rent (Home Office)
If you use your home as your office, you can deduct the portion of your rent that corresponds to the space used for work. This allocation of mixed personal/business costs is known as household apportionment (家事按分) . The most common method is to use the floor area ratio:
Floor Area Method
Calculate the percentage of your home’s floor area that is dedicated to your workspace. For example, if you have a 15 m² office area in a 60 m² apartment, that’s 25% of the space. You may then deduct 25% of your monthly rent as a business expense . (If your monthly rent is ¥100,000, about ¥25,000 would be claimable in this example.)
Ensure that the space is truly used for business (ideally a separate room or clearly partitioned area). You cannot deduct rent for purely private areas (like your bedroom). In practice, tax authorities require that any portion of rent claimed is “clearly distinguishable as being directly necessary for business” and backed by records . That means you should document how you determined the percentage (for instance, keep a simple floor plan or calculation note in your files). If you rent an external office or co-working space exclusively for work, then 100% of that rent is deductible. (Note: Rent paid to family members in the same household is not deductible per Japanese tax rules .)
Utilities (Electricity, Gas, Water) and Internet
Utilities for your home office are also deductible to the extent they are used for business. This includes electricity, gas, water, and also communication services like internet and phone bills. When your house is your main place of work, a portion of water, gas, and electricity bills can be claimed as business expenses . You should apportion these costs similar to rent – only the business-use portion is deductible:
Electricity
If you work from home, you may, for simplicity, apply the same percentage as your office space. For instance, using 25% (from the earlier example) of your electric bill as a business expense is reasonable if your work area is about one-quarter of your home. A more precise method is to use the time basis – e.g. if you work at home roughly 40 hours a week out of the 168 hours in a week (~24%), you could expense about 24% of your monthly electric bill . Some people even apportion by the number of work-related appliances or outlets in use , but a time or area-based calculation is usually sufficient.
Gas & Water
Gas and water utilities are deductible only if they relate to your business activities. In practice, many freelancers have minimal gas/water use for work (since these are often for cooking, bathing, etc.), so you should claim these carefully and only if justified. For example, if you run a baking or cooking class from your home, a portion of your gas for cooking and water for cleaning is clearly business-related and can be expensed . In such cases, use a similar time-based ratio to determine the business portion. For instance, one calculation example shows that with ¥20,000 monthly gas cost and using the home 7 hours a day, 5 days a week for work (~20% of total time), about ¥4,000 (20%) of the gas bill can be claimed . If your gas is mainly for home heating or kitchen use not critical to your work, you might either forego expensing it or allocate a very modest percentage (perhaps matching the office area ratio). The same goes for water – unless your business significantly uses water (e.g. a home studio that clients visit, increasing water use, or a craft that requires water), the deductible portion may be small. Always err on the side of a reasonable estimate that you could explain if asked.
Internet & Phone
Internet service is often essential for freelance work and can be partially deducted. If you have a dedicated business internet line, you can expense it fully. If you use a single home internet for both personal and work, allocate by usage. For example, if you use the internet for work roughly 5 days out of 7, you could justify expensing about 70% of your internet bill . Similarly, with a mobile phone, you can expense the portion of the bill used for work (e.g. if half your calls/data are work-related, claim 50%). Tip: It’s best to have a separate business phone or SIM if possible, so you can claim 100% of that cost and avoid tricky calculations . Otherwise, keep an itemized log of business calls or an estimated percentage of usage in case of scrutiny.
Important
As with rent, any utility expense you deduct must be for the business-use portion only. The National Tax Agency explicitly limits the deduction to the part of a house utility that is “clearly necessary for business execution” . Keep copies of utility bills and note the basis of your calculations (e.g. work hours, floor area) to substantiate your claims.
Office Equipment & Supplies
Money spent on office equipment and supplies is generally tax-deductible. This includes items like computers, printers, cameras, monitors, office furniture, as well as everyday supplies (pens, notebooks, ink, etc.). However, for larger purchases, Japanese tax rules distinguish between immediate expenses and capital expenditures:
Small Equipment and Supplies
Items with a useful life under 1 year or costing less than ¥100,000 can be treated as supplies (消耗品費) and deducted in full in the year of purchase . For example, routine office supplies, a graphics tablet costing ¥50,000, or a smartphone priced at ¥80,000 (if used for business) can be expensed outright. Always keep receipts, and for electronics or devices, note the date of purchase and item description in your records.
High-value Equipment (Depreciation)
If you buy business equipment or machinery that costs ¥100,000 or more, you generally cannot deduct the full cost in one year . Instead, you must depreciate it over its useful life as defined by tax law. This means you expense a portion of the cost each year. For example, a ¥300,000 computer might have a useful life of 4 years, so you’d deduct 1/4 of its cost each year as depreciation (approximately ¥75,000 per year). The accounting for this is done via a “depreciation expense (減価償却費)” entry . Exception: If the item costs between ¥100,000 and ¥200,000, Japanese rules allow an accelerated method called ikkatsu shoukyaku (一括償却) – you can evenly depreciate it over 3 years . (Essentially, one-third of the cost each year for three years.) This is optional but can simplify claiming mid-range assets. Keep a list of such assets with their purchase dates and costs, as you’ll need to carry the depreciation forward each year.
Personal vs Business Use
If equipment is used partly for personal use, only deduct the business-use percentage. For instance, if you have a computer that you use 50% for freelancing and 50% for personal matters, you should only expense half of its depreciation or cost. In practice, many freelancers try to have dedicated work devices to claim 100%. If that’s not feasible, make a reasonable allocation and document the rationale (e.g. hours used for work vs personal per week).
In summary, all typical office tools and consumables are deductible. Just remember the ¥100,000 rule for big-ticket items and keep purchase records. Even if you must depreciate something, you’re still getting the full deduction value over time – just spread across years.
Transportation & Travel Expenses
Transportation costs that are incurred for business are fully deductible. This category, known as 旅費交通費 (travel and transportation), covers daily travel for work as well as business trips. Common deductible travel expenses include :
Local transport
Train and subway fares, bus fares, taxi charges, and other transit costs when you go to meet a client, visit a job site, attend a meeting or coworking space, etc. If you commute from home to a separate office that you maintain for work, that commute is generally considered a business expense for a self-employed person (unlike employees, who cannot deduct their commute). However, if your home is your office, you obviously have no daily commute – any travel from home to meet clients or vendors is business travel.
Long-distance travel
If you take a shinkansen (bullet train) or flight for a business trip (for example, traveling from Tokyo to Osaka to meet a client or attend a conference), those fares are deductible. Likewise, hotel or lodging costs for business travel can be expensed . Be sure to get receipts for hotels and note the business purpose of the trip (conference, client meeting, etc.).
Personal vehicle use
If you use a car or motorcycle for your freelance work (e.g., driving to assignments or deliveries), you can deduct automobile expenses proportionate to business use. This includes gasoline, highway tolls, parking fees, vehicle maintenance, and even a portion of auto insurance or vehicle tax if the vehicle is partly used for work . You should keep a log of business mileage (distance or days used for work vs total) to determine the deductible percentage. For example, if 30% of your car’s use is for business, you could deduct 30% of your fuel and maintenance costs. If the car is used almost exclusively for work, you might claim most expenses (but be cautious if the vehicle is also for personal family use – then an appropriate split is necessary). Note: If you haven’t formally registered the car as a business asset, it’s still okay to expense the usage costs – just maintain documentation.
Other travel costs
This can include things like toll road fees, rental car fees when traveling for work, the cost of a Japan Rail Pass if used for a business tour, and so on. Also, if you entertain a client during a trip (e.g., pay for their meal), that portion would fall under entertainment (discussed below), but your own travel costs remain travel expenses.
Remember to save all tickets and receipts (e.g. IC card top-up receipts, highway toll receipts, etc.). If receipts are not available (for example, a train fare paid by IC card), keep a simple diary entry of the date, route, and amount. Consistency and reasonableness are key. As long as the travel was work-related, you are entitled to deduct it. It’s wise to jot down the business purpose of significant trips (e.g., “Client meeting with X at Osaka on Oct 5”) in case you need to explain later.
Professional Service Fees (Legal & Accounting)
If you incur professional fees for your business, such as hiring an accountant or tax adviser, an attorney, or other consultants, those costs are fully deductible. For example, fees paid to a tax accountant (税理士) for preparing your tax return or to a lawyer for drafting/reviewing a contract are considered business expenses . There is no special limit on these; you can include the entire amount in your expenses for the year in which you paid them.
Such expenses are typically categorized under general business expense accounts (e.g. “professional fees,” “outsourced services,” or 支払手数料 in Japanese bookkeeping). The key is that the service must be related to your business operations or income. If you consult a lawyer for a personal legal matter, that wouldn’t count. But if it’s for your freelance work (say, advice on a client agreement), it’s valid. Tip: Keep the invoices or engagement letters from the professionals as proof of the business nature of the service.
In addition, any outsourcing or subcontracting costs you pay to others are deductible. If you hire another freelancer or pay an assistant to help with a project, that expense (often recorded as 外注費) is a business cost . Make sure to document the payment (e.g., have an invoice or at least a record of the work done and amount paid).
Other Common Deductible Expenses
Freelancers can claim many other expenses related to running the business. Below are additional categories you should consider when tallying up your deductions:
Communication Expenses
In addition to internet/phone, any business-related communication cost is deductible. This includes postage for mailing documents, shipping costs for sending products or contract materials, courier fees, etc. (These often fall under 通信費 or 荷造運賃 in accounting) . For example, stamps for sending invoices or shipping fees for goods you sold are valid expenses.
Advertising & Marketing
Money spent to promote your business can be deducted. This covers online advertising (Google/Facebook ads), website hosting and domain fees, printing flyers or business cards, listing fees on platforms, etc. . Keep receipts or proofs of ad purchases. Even the cost of a simple Facebook ad campaign or a boosted post to showcase your work is an expense.
Business Insurance Premiums
If you pay insurance to protect your business, those premiums are deductible. Examples: liability insurance, professional indemnity insurance, fire insurance for a home office, or automobile insurance proportional to business use . (Personal insurance like national health insurance or life insurance is not a business expense – those are handled as personal deductions on your tax return, not as expenses.)
Repairs and Maintenance
Any expenses to repair or maintain business assets or facilities are deductible . For instance, repairing your work computer, servicing equipment, or fixing wear-and-tear in a home office (like repainting the walls of your office room) can be claimed. If you had to call a technician to fix your work laptop or pay for a software repair, those costs count. Keep invoices from service providers or receipts for parts.
Business Taxes and Fees
Taxes you pay related to the business can be expensed. Common examples for Tokyo freelancers are Enterprise Tax (事業税), which is a metropolitan business tax on your income (if your income is above a certain threshold), as well as any business registration fees, license fees, or stamp duty you pay on contracts . Also, if you own fixed assets used for business (e.g. a vehicle or real estate), the fixed asset tax or automobile tax attributable to those assets is deductible . (In contrast, income tax and resident tax on your own income are not deductible expenses – they are the result of your profit, not a cost to earn it .) If you pay any professional association dues or annual fees for certifications related to your freelance work, those can usually be expensed as well.
Client Entertainment (Meals & Hospitality)
Costs for entertaining clients or business associates are deductible within reason. This falls under 接待交際費 (entertainment expenses). For example, if you take a client out to dinner, pay for drinks during a business meeting, or rent a karaoke room to celebrate a project with a client, those charges can be claimed . Similarly, small gifts to clients or thank-you flowers to a referrer are considered business entertainment expenses . It’s crucial to document these – note on the receipt (or in a log) who you met and what business purpose was discussed, because entertainment expenses are often scrutinized to ensure they’re not personal leisure. While there is no hard cap for a sole proprietor, spending should be reasonable and clearly business-related.
Other Miscellaneous Expenses
Nearly any expense that is ordinary and necessary for your freelance work can be deducted. This includes things like bank fees or payment processing fees (e.g., transaction fees on PayPal or Stripe, or international wire fees), software subscriptions or SaaS tools you use for work (for example, Adobe Creative Cloud, cloud storage services, subscription to a job platform), education or training costs (if you take a course or attend a workshop to improve your professional skills, that fee is deductible), and office refreshments (coffee/tea/water for clients who visit, etc., though modest). If an expense doesn’t clearly fit a standard category, it can be recorded as 雑費 (miscellaneous) , but try to use specific categories when possible. Always ask yourself: “Is this expense directly related to my business income?” If yes, and you have proof of the cost, you can likely deduct it.
Tracking and Documenting Expenses: Best Practices
Proper record-keeping is critical for White Return filers. Not only will this make filing your taxes easier, it will also ensure you can defend your deductions if ever questioned. Here are best practices for tracking and documenting your expenses:
Maintain a Ledger or Accounting Records
As a sole proprietor, you are required to keep books recording your income and expenses throughout the year . You can do this with a simple spreadsheet or notebook, but many find it easier to use software. Popular cloud accounting tools in Japan include Freee, Money Forward, and Yayoi . These tools (available in Japanese, with some English support in Freee/MoneyForward) can automate a lot of the work: for example, by linking your bank account or credit card to import transactions, and by categorizing expenses (they often guess categories like rent, utilities, advertising, supplies, etc. for you) . They also help generate the final statements you need (like the Income and Expense summary (収支内訳書) for White Return). If you prefer not to use dedicated software, set up a spreadsheet with columns for date, vendor, amount, and category of expense, and update it regularly (daily or weekly). The key is to not leave it all until year-end.
Keep All Receipts and Invoices
For every business expense, keep the receipt (領収書) or invoice. In Japan, you are expected to retain these source documents as evidence of your expenses. For White Return filers, the law requires you to save relevant receipts and documents for at least 5 years (and keep your ledgers for 7 years) . Organize receipts by month or category, either in an accordion file or digitally. Scanning or photographing receipts is a good practice (modern smartphones and apps can auto-crop and archive receipts). Digital storage of receipts is officially allowed as long as you meet certain guidelines (ensuring the image has date, amount, etc. and is stored securely), but keeping the paper originals in a safe place is simplest. Even small receipts (train tickets, coffee with a client, postage stamps) can add up – save them. If you ever misplace a receipt, a credit card statement or bank statement showing the expense can help, but a receipt is best. Also note that either a formal receipt or even a simpler sales slip is acceptable for documentation in Japan – as long as it shows the necessary details (date, amount, vendor).
Record the Business Purpose
Especially for any unusual or potentially personal-looking expenses (like meals, gifts, travel), make a brief note of the business purpose. For example, on a meal receipt, write “Client meeting with ABC Corp, project discussion”. For a high travel expense, note which client or project it was for. Having this noted contemporaneously will help if you need to recall details later or if Tax Office asks for clarification during an audit. It also helps you double-check that the expense was indeed business-related.
Use Separate Accounts When Possible
A good practice is to separate business and personal finances. If you can, use a dedicated business bank account or credit card for all your freelance income and expenses. This way, your bank statements naturally become a record of business cash flow, and you won’t accidentally mix in personal spending. Many Japanese freelancers simply use one account for simplicity, but then you must be diligent about segregating expenses in your records. At the very least, consider a separate credit card for business purchases. There are even business prepaid cards and corporate cards available for sole proprietors. Using separate accounts isn’t legally required, but it will immensely simplify bookkeeping and reduce mistakes.
Leverage Tech Tools
In addition to accounting software, you can use apps for expense tracking. For instance, smartphone apps from Money Forward or Freee allow you to snap photos of receipts on the go and tag them with expense categories. There are English-friendly expense tracker apps as well. Choose a system that you find easy so you’ll actually stick to it. The goal is real-time or regular tracking, rather than scrambling at tax time.
Document Apportionment Calculations
When you claim partial expenses (home office rent, utilities, personal car, etc.), keep a clear record of how you arrived at the percentage. You might create a simple document with your floor plan and area calculation, or a note like “Internet usage ≈ 70% business (used 5 days/week for work)”. If you use time-based calculations, you could keep a log of your work hours at home for a representative month to justify the ratio. While you typically don’t submit these calculations with your tax return, you should have them on file in case of inquiry. It shows you used a rational method to compute the expense, which satisfies the tax authorities if ever reviewed .
Stay Consistent Year-to-Year
Apply the same logic each year for recurring expenses. If you claimed 25% of your rent as business last year and your working situation hasn’t changed, it should probably be 25% again this year. Big changes (e.g. you moved to a larger apartment or went full remote, etc.) can warrant a new percentage – just be ready to explain. Consistency helps demonstrate that you’re not arbitrarily inflating expenses.
Seek Advice or Upgrade to Blue Return if Needed
If your freelance business grows, consider consulting with a tax professional or using the Blue Return (青色申告) in the future for additional benefits (like a ¥650,000 extra deduction and more flexible loss carryovers). That said, the types of expenses you can deduct are the same for White and Blue – both allow the necessary business expenses we’ve discussed. The main difference is in record-keeping and filing format. For now, as a White Return filer, focus on diligent tracking and you can still optimize your tax by claiming all valid expenses.
By following these practices – keeping thorough records, saving receipts for 5+ years , and using tools to stay organized – you’ll make your tax filing much smoother. You’ll also be able to maximize your deductions confidently, knowing you have the documentation to back up each expense. This not only ensures compliance with Japanese tax laws but also gives you peace of mind to focus on your freelance work rather than worrying about taxes. Good luck with your filing, and remember that every legitimate expense you track and deduct is money saved come tax time!
Sources:
- National Tax Agency Japan – Guidelines on necessary business expenses and record keeping
- Freee (Japan) – White Return Expense Rules and Examples (in Japanese)
- Inbound Technology (インバウンドテクノロジー) – What Can I Expense as a Freelancer in Japan?
- RetireJapan Blog – Filing Taxes in Japan as a Freelancer (Guest Post) (recommendations on accounting software)
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