How to reduce your income tax

[sssqsssq@hotmail.com]

Hi
I went with my wife last week to the tax office, and I learned the following
I want to share the information with you hoping to be useful , I hope that you share any information that you know with me about reducing tax , so it can be useful for every one
Those information can be knowing to every one but no harm in sharing

-Well if you are supporting your family ( if you are house holder ) that would reduce your tax according to the members of the family you are supporting
- if you are transferring money out side the country to support member of the family like father or mother that would also reduce your income tax ( please remember to keep the transfer slips )
- if you have life insurance that would also reduce your tax

I hope you can share information with me that can be useful in reducing tax

[KansaiBen]

Originally Posted by sssqsssq@hotmail.com

Hi
I went with my wife last week to the tax office, and I learned the following
I want to share the information with you hoping to be useful , I hope that you share any information that you know with me about reducing tax , so it can be useful for every one
Those information can be knowing to every one but no harm in sharing

-Well if you are supporting your family ( if you are house holder ) that would reduce your tax according to the members of the family you are supporting
- if you are transferring money out side the country to support member of the family like father or mother that would also reduce your income tax ( please remember to keep the transfer slips )
- if you have life insurance that would also reduce your tax

I hope you can share information with me that can be useful in reducing tax

Those are called legitimate tax deductions for which you can deduct all sorts of things to make your taxable income lower. Keep in mind you need to be making a fair bit of income to support a wife and kids in the first place.

If you have a mortgage and are paying interest its tax deductible.

If you are paying health insurance premiums through national health then you can claim a deduction.

[R.Akashi]

Japanese income tax rates aren`t too bad compared to some western countries..

Taking a bit of time to enquire the few tax breaks available would amount to a substantial saving for those in the lower income brackets..

Of course, you could always ask your employer to pay a portion of your salary cash in hand, or if here less than 5 years, get a portion paid overseas.....(off the record of course)

Robert Akashi

[Gaijin 06]

Originally Posted by R.Akashi

Japanese income tax rates aren`t too bad compared to some western countries..

Japanese taxes are very high, especially for the highest paid. The top marginal rate is 50% when you factor in the property taxes which are derived on income.

How many countries have a higher top marginal rate than this?

[Sterling]

Originally Posted by sssqsssq@hotmail.com

Hi
I went with my wife last week to the tax office, and I learned the following
I want to share the information with you hoping to be useful , I hope that you share any information that you know with me about reducing tax , so it can be useful for every one
Those information can be knowing to every one but no harm in sharing

-Well if you are supporting your family ( if you are house holder ) that would reduce your tax according to the members of the family you are supporting
- if you are transferring money out side the country to support member of the family like father or mother that would also reduce your income tax ( please remember to keep the transfer slips )
- if you have life insurance that would also reduce your tax

I hope you can share information with me that can be useful in reducing tax

Does anyone know whether this only applies to Japanese life insurance policies or not?

[Gaijin 06]

Originally Posted by Sterling

Does anyone know whether this only applies to Japanese life insurance policies or not?

I would guess with 99% conviction that it only applies to Japanese life insurance policies.

[Majestic]

Yep, only Japanese life insurance policies, unfortunately.

[R.Akashi]

You used to be able to deduct the princely sum of 50,000 yen p.a on an offshore policy...
dont know if it still applies..

G6, ..I think you may have misunderstood my post though..

You are partly right, but again, only if you are in the higher income bracket, will you pay a max of 46% I believe..Most of the people here on the forums
will be earning less than 20mio.

When you compare to other countries income rates, you can see the difference in percentages. If a brit, you would be taxed at 40% on an 8mio yen (equivalent) salary. (based on 200 yen to the pound)Now, its a 135 yen , approx 5.5 mio yen...What rate would you pay in Japan on 5.5 mio..


Dont forget as well, that the governemnts giveth with one hand, and they taketh with the other..Consumption tax here is one of the lowest in the world.

If you do some homework, you will see there are only a handful of countries that charge a lower income tax rate and have a lower vat/consumption rate at the same time...



Robert Akashi

[cucashopboy]

Originally Posted by Sterling

Does anyone know whether this only applies to Japanese life insurance policies or not?

I don't have life insurance, but much to my surprise for the last three years I've been able to write off my Interglobal health insurance (i.e., nothing to do with the Japanese health system) as a tax-deductible expense.

[Majestic]

Regarding life insurance, the taxanswer site from the NTA has the details. Unfortunately only Japanese life insurance policies are eligible for the life insurance deduction. Health insurance is a different beast.

http://www.nta.go.jp/taxanswer/shotoku/1140.htm

[cokakola]

Hi so sending money overseas can reduce your tax liability here? How do they know whether you're supporting your parents or just sending into your own account off shore??

[Guru]

If you are working for a company, your employer files the tax for you. So, that tells you something about paying individual taxes in Japan.


If you are filing your own taxes (like in USA or other western countries), you would have more wiggle rooms to come up with the deductibles.
Japanese tax schemes are skewed toward creating an egalitarian society (similar to the welfare states in Europe). The best way to earn the tax-exempt payout would be winning a lottery in Japan.

[kotoha]

Even if your company does your taxes for you, you can (and probably should) file with your local tax office too. Last year my husband got about 150,000 yen back from his company, and then about 40,000 more from filing himself. I unfortunately don't remember the details of WHAT exactly the company missed or was unable to deduct, but we did get two tax returns (and I got everything back on my tiny bit of part time work since it was under the minimum for owing taxes at all).

If you are a freelancer (whether you are ACTUALLY a freelancer or if some lousy eikaiwa just doesnt want to pay unemployment taxes for you), or actually own your own business you can claim up to 30% of your income as business related expenses (transportation, phone bills, pens and paper, whatever) without receipts. If you HAVE receipts you can claim as much as you like.

"Life insurance" in this case also includes supplemental health insurance, such as those policies that will give you 10,000 yen a day if you are hospitalized, or a lump sum if you get cancer, etc. It doesn't actually have to include DEATH in order to fall into that category.

You get a deduction for insurance and pension if you are in the National Health Insurance OR Shakai Hoken through your company.... the only difference is that if you have Shakai Hoken the company will give you the refund, and if you have NHI it will come straight from the tax office. You get the deduction either way.

And don't forget (for the guys at least) that you can claim housewives as dependants here (I dont think you can in most Western countries unless your wife is disabled and not able to work), as well as children and elderly parents, grandparents etc. You can claim your wife as a full dependant even if she works part time, as long as she makes less than 350,000 yen a year, and a partial dependant if she makes less than 1,000,000 or so.

[sssqsssq@hotmail.com]

Originally Posted by cokakola

Hi so sending money overseas can reduce your tax liability here? How do they know whether you're supporting your parents or just sending into your own account off shore??

well , you have to keep the transfer slips for sending money overseas and your parents name have to appear on them.

[ninjins]

I heard that if I work from home (e.g., a programmer, editor, etc.) I can claim my rent as a deduction if I show my bank transfers and my rent contract. Is that true?

Also, I think as a rule they take of your national health expenses as they are clearly stated, but is it also possible to bring receipts for the 30% that I paid for medical treatment and also deduct those? I spent a lot of time at the dentist this year, and even with the national health, I still paid about Y40,000 out of pocket.

Thanks for your help.

[Edokko]

Originally Posted by KansaiBen

If you have a mortgage and are paying interest its tax deductible.

Nope, sorry. This is a common misconception. One of the only places in the world where this is true is the U.S. (and then only if you itemize and forgo the standard deduction).

In Japan mortgage interest is not deductible. But, the good news is that the Japanese tax authorities allow a deduction based on 1% of the principal outstanding on your mortgage.

[cucashopboy]

Originally Posted by ninjins

I heard that if I work from home (e.g., a programmer, editor, etc.) I can claim my rent as a deduction if I show my bank transfers and my rent contract. Is that true?

Also, I think as a rule they take of your national health expenses as they are clearly stated, but is it also possible to bring receipts for the 30% that I paid for medical treatment and also deduct those? I spent a lot of time at the dentist this year, and even with the national health, I still paid about Y40,000 out of pocket.

Thanks for your help.

I filed for tax last week and took in all the medical receipts for myself, my wife (who is a dependent at the moment) and my son for last year, which came to about 240,000 yen. They subtracted 100,000 from this and I was able to reduce my taxable income by 140,000.

[Edokko]

Originally Posted by cucashopboy

I filed for tax last week and took in all the medical receipts for myself, my wife (who is a dependent at the moment) and my son for last year, which came to about 240,000 yen. They subtracted 100,000 from this and I was able to reduce my taxable income by 140,000.

Right. If you had over 100,000 in out-of-pocket medical expenses (i.e. the 30% national health insurance doesn't pay), it's probably worth filing, even if your employer has already done so, because you may get a refund. Note that very few Japanese nationals are aware you can file on your own, so don't just rely on your Japanese spouse or family on this one.

[GaijinTax.Com]

Originally Posted by Edokko

Right. If you had over 100,000 in out-of-pocket medical expenses (i.e. the 30% national health insurance doesn't pay), it's probably worth filing, even if your employer has already done so, because you may get a refund. Note that very few Japanese nationals are aware you can file on your own, so don't just rely on your Japanese spouse or family on this one.

Very true about the point regarding Japanese not being aware that you can file yourself. Most permanent employees have their employer take care of everything from day 1, so there is very little involvement. But then again, in most countries people are confused about their own taxes.

There are many things which you can deduct, particularly if you have some sort of non-employment income. This is regarded as "business sales/receipts", against which your are allowed to claim business expenses such as a portion of your rent and utilities (if you work from home), travel expenses for business trips, phone and internet bills, 'entertaining' clients with dinners and sporting event tickets and so on. These expenses can also help offset your Employment income should you have any.

[tasuiga wa ikan]

Originally Posted by Edokko

Nope, sorry. This is a common misconception. One of the only places in the world where this is true is the U.S. (and then only if you itemize and forgo the standard deduction).

In Japan mortgage interest is not deductible. But, the good news is that the Japanese tax authorities allow a deduction based on 1% of the principal outstanding on your mortgage.

Somewhere between 0.4% and 1% of the outstanding amount. I though this was good news too, so I went down to the tax office for my deduction. When I got to the fourth checkbox on the front of form, it became obvious that our house is too old and not up to seismic standards. They shrugged and said sorry, bye. Wouldn't have been much, but every little bit counts. I kept their pen instead.

[kimoochii]

Originally Posted by cucashopboy

I don't have life insurance, but much to my surprise for the last three years I've been able to write off my Interglobal health insurance (i.e., nothing to do with the Japanese health system) as a tax-deductible expense.

Hi, I also have interglobal insurance and I was wondering, where on the form did you include the information about your insurance? Also, what supporting evidence did you provide?
I was going to add it to section 14 of the attached picture. I read that to calculate the correct amount you need to(if it is above 50,000yen) times the initial figure by 0.25 then to this new figure add 25000yen.
Sound correct to you?

Insurance is always a big chunk of my pay packet, so I would really really like to get some of this back. Sorry if this has been answered above, but there seems to be a lot of conflicting information in these posts.

[cucashopboy]

The numbering on the form I used was slightly different but I entered the cost of private health insurance in your number 12 〔社会保険。。。）
There were two places I had to insert the number, one on each page.

When I paid for Interglobal insurance I paid in US dollars, which were converted into yen and sent as a postal transfer by the post office. When I filed for tax I took the form from the post office and the letter from Interglobal with the cost on as proof but they were not looked at.

Hope this helps.

[kimoochii]

Ok, thanks for your help!

[GaijinTax.Com]

I don't think you can actually deduct private health insurance through that section though, its only for the public insurance. So if it ever gets looked into, you'l be told that you can't do it.

[Ken44]

Originally Posted by GaijinTax.Com

I don't think you can actually deduct private health insurance through that section though, its only for the public insurance. So if it ever gets looked into, you'l be told that you can't do it.

Yeah, I too was told I couldn't deduct my private insurance (Interglobal)

However I help pay my mother's medical costs in the States and I can deduct these expenses. I am required to provide the original medical billing statement as well as copies of the postal money transfer in order to qualify for the deduction. Last year I spent almost $10,000 so the 1,000,000 yen deduction was nice.

[GaijinTax.Com]

Ken, sounds great that you were able to do that. Havent considered medical expenses for parents abroad before.
If your regularly send money back to your parents, and they have no income/pension, then it is possible that they be classified as your dependants.