Tax & Filing 2026

Working From Home in Japan: The Percentage You Claim Matters Less Than Why You Chose It

What Article 96 of the Income Tax Act Enforcement Order and Basic Circulars 45-1 and 45-2 actually ask, and the records that explain your split.

Art. 96

Exceptions for household-related expenses

50%

A test line, not a cap (Circular 45-2)

Records that explain "why this ratio"

9 slides

Before asking "how much of my rent?"

2 / 9

Confident percentages for rent and electricity are everywhere online. The NTA has not published them.

The laws, circulars and NTA pages checked for the article contain no such benchmark. There is no number to find because the rules ask for something else: a basis for the split.

💡 The question is not "what percentage?" but "can your records explain why that percentage?"

The law asks one thing: can you clearly separate it?

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A household-related expense (kaji kanren-hi) serves both your household and your business. As a rule it is not deductible. Article 96 sets out the exceptions (summarised):

①

Item 1: the main part is necessary for the business, and the necessary part can be "clearly separated"

②

Item 2: for approved blue-return filers, the part "shown", based on transaction records and the like, to have been directly necessary for the business

💡 Neither item names a percentage. The test is whether the business portion can be distinguished

What the 50% line really means: it is not a cap

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Circular 45-2 (summarised): "even where the necessary part is 50% or less, if it can be clearly separated, that part may be included as a necessary expense."

Common reading	What Circular 45-2 actually supports
Below 50%, nothing is deductible	At 50% or less, a clearly separable part may still be included (proviso)
Up to 50% is fine to claim	50% is a test line, not a recommended ratio

✅ Circular 45-1 judges the "main part" by looking at the whole picture, including how the home and other assets are actually used

Income category and blue or white return

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	Item 1	Item 2
Who	Anyone (blue or white return)	Residents approved to file a blue return
Income	Real estate, business, timber and miscellaneous	Real estate, business and timber (miscellaneous not listed)
Wording	"clearly separated"	"shown", based on transaction records and the like

💡 An employee with miscellaneous side income falls under item 1. Whether your income is business or miscellaneous depends on the facts, and these slides cannot decide that

Four records that explain "why this ratio"

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Expense	What can support the ratio	What to keep
Rent	Floor area used for work	Floor plan with the work area marked, plus the calculation
Rent (shared space)	Share of time used for work	A log of days and hours worked
Electricity	Devices, rooms and hours of use	Device list, work hours and the formula
Internet / phone	Actual business use of the line	Devices and purposes, whether family shares the line

💡 The NTA does not prescribe these methods. They are examples of records that can explain your split

The calculation (illustrative figures)

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Work area 7.5 m² ÷ whole home 50 m² = 15%

Keep the floor plan and this formula as the basis for treating 15% of rent as business use. What counts is not the result but the formula and the source documents behind it.

🔁

You move, your hours grow, your family starts sharing the line: when usage changes, so does the basis. Review it once a year with your year-end bookkeeping

⚠️ The figures only illustrate the calculation. An area-based split is not a method prescribed by the NTA

What to do today

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①

List the rent, electricity and communication costs you also use for your side business

②

For each, decide whether you will explain the ratio by floor area, time, or devices and purposes

③

Mark your work area on a floor plan and save it with the area calculation

④

For the next one to two weeks, log the days and hours you work (a calendar will do)

⑤

Write down anything you are unsure about, including your income category, and ask your tax office or a zeirishi

The rules ask you to explain the split

Neither Article 96 nor the circulars name a percentage. The test is whether the part can be clearly separated

50% is a test line, not a cap. At 50% or less, a clearly separable part may still be included

The number can change over time. If the reason it changed is on record too, that record is your basis

※

These slides are general information, not tax advice. Income categories and apportionment are individual determinations for your tax office or a licensed tax accountant. Trading carries the risk of losing your principal

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