Almost every freelancer in Japan I’ve talked to works at least partly from home. Your apartment is also your office, your phone takes guest calls and calls from your mum, and the electricity bill pays for the laptop and the rice cooker. Japanese tax law has a name for splitting these mixed costs: 家事按分 (kaji anbun). It’s one of the most useful deductions a sole proprietor has, and one of the most often done badly.

I’ve done it for my own work and helped friends sort theirs out before 確定申告. The rule itself is simple. The hard part is the discipline around it, so here’s how I explain it over coffee.

TL;DR

  • 家事按分 (kaji anbun) means deducting only the business share of an expense you use for both personal life and business, such as rent, utilities, internet, phone or a car.
  • The ratio has to rest on a reasonable, explainable basis that reflects your actual business use: floor area, hours of use, mileage or call logs. “It felt like about half” doesn’t count.
  • Blue-return (青色申告) and white-return (白色申告) filers fall under different provisions, but both can deduct a clearly identifiable business portion that’s necessary for the work, even if it’s 50% or less.
  • Write down how you got each ratio and keep the underlying receipts and bills. If the tax office asks, that note is your defence.
  • Review the allocation annually and document changes in business use or calculation methods.

What Is Kaji Anbun, Exactly?

Kaji anbun is the practice of splitting a mixed-use expense into a personal part and a business part, and putting only the business part in your books as a deductible expense. The word 家事 here doesn’t mean housework. In tax language it means “household or personal,” and 按分 means “apportion.”

The logic is fair to both sides. If you rent a 2LDK and one room is your dedicated office, deducting the whole rent is clearly wrong. Deducting nothing ignores a real business cost. Kaji anbun sits in the middle.

Expenses commonly apportioned:

  • Rent (家賃): usually by floor area
  • Electricity (電気代): by usage, such as working hours or the rooms used for work
  • Internet: by usage time or purpose
  • Mobile phone: by call logs or usage time
  • Car costs: fuel, insurance, depreciation, by business mileage

Water and gas are harder to justify for most desk-based work. Unless your business actually uses them (a cleaning business, say), I’d usually leave them out.

How Do You Calculate a Reasonable Ratio?

A reasonable ratio is one you could explain in a sentence to a tax officer, backed by something measurable. Here are bases that are commonly used. The calculations below are illustrative: whether a given ratio suits you always depends on your actual business use.

Floor area for rent. If your apartment is 50㎡ and your work room is 10㎡ and used only for work, that’s 20%. Some people add a share of the common areas (hallway, toilet). That requires evidence that the business actually needs those areas, so keep it modest and write down why.

Time for utilities and internet. Illustrative arithmetic: if you work about 8 hours a day, 5 days a week, that’s 40 of the 168 hours in a week, roughly 24%. But working those hours doesn’t by itself make 24% of the bill a business cost. The household also uses electricity and internet during and outside those hours, so the ratio needs to account for that household use and reflect how much of the actual usage is for the business. For electricity, some people combine the work room’s share of floor area with working hours as one way to do this. Whatever the method, you need the arithmetic plus a basis showing the ratio reflects real business use.

Logs for phone and car. This is where records really pay off. A month of call history or a simple mileage log (date, destination, purpose, km) turns a guess into evidence. For me the car matters most. Property visits, contractor meetings and supply runs add up, so the mileage log earns its keep.

A worked example (illustrative numbers only; whether 20% is appropriate depends on your actual use): monthly rent ¥120,000 with a 20% area-based ratio gives ¥24,000 a month of business rent, or ¥288,000 a year. In this example, ¥288,000 a year goes into necessary expenses. That doesn’t mean your tax goes down by ¥288,000.

Is It Different for Blue vs White Return Filers?

The statutory provisions differ, but less changes in practice than people often think. For blue-return filers, the rules allow the business portion of a mixed expense to be deducted when it’s necessary for the business and clearly separated in the books. For everyone, white-return filers included, the NTA’s basic income tax circular (45-2) says that even when the business portion is 50% or less, the part clearly shown to be directly necessary for the business can be deducted. So deducting a small but clearly identifiable business share isn’t something only blue filers can do. Either way, what matters is being able to show the portion is necessary for the business and clearly separable.

I won’t pretend to give you the exact line for your case. That’s a question for your 税理士 or the tax office. Whether to file blue is a separate decision with its own trade-offs, which we covered in our aoiro vs white return post.

What Records Should You Keep?

Keep two things: the original bills and receipts, and a short written note of how you got each ratio. Most people keep the first and forget the second.

My note is a single page per year. For each apportioned item it lists the expense, the basis (area, hours, mileage), the measurements and the resulting percentage. For rent I attach the floor plan from the lease with the work room marked. That’s it. It takes twenty minutes and turns “trust me” into “here’s the calculation.”

On the receipts side, the usual rules apply. Since October 2023 the invoice system (インボイス制度) matters if you claim consumption-tax input credits. Under the electronic bookkeeping law (電子帳簿保存法), bills you receive electronically (most utility and phone statements now) generally have to be kept as electronic data. You need tamper-prevention measures, such as an internal rule on correcting and deleting records, and you have to be able to display or print the records clearly. Search by date, amount and counterparty is required in principle. It’s waived if you can respond to a tax officer’s request to download the data and either your base-period sales (normally from two years earlier) are ¥50 million or less, or you can provide properly organized printouts.

Blue-return books and specified documents generally require seven years of retention; some other documents, including certain invoices, require five years for income-tax purposes. Separate consumption-tax requirements may require longer retention. Keeping everything for seven years is a simple practical policy.

If you’re a consumption-tax payer under general taxation (一般課税), identify the business-use portion of your taxable purchases and claim input credit only on that portion, subject to the usual input-credit requirements. If you deduct 20% of your electricity bill as an expense, don’t claim input credit on the consumption tax for 100% of it. (Residential rent is generally non-taxable for consumption tax, so it carries no input credit.) Simplified taxation (簡易課税) and the 2割特例, where they apply, work differently: they calculate the credit from the consumption tax on your sales, not from individual expenses.

This is honestly where we got the idea for part of what Reshito does. Pulling date, payee, amount and tax rate out of a pile of mixed bills is the tedious bit. Reshito extracts receipt details and exports organized data to CSV, and you can apply your documented business percentage in your spreadsheet or accounting software. You still need to decide the ratio yourself. No tool can tell you how big your office is.

What Are the Common Mistakes?

The most common mistake is choosing a ratio based on how much tax you want to save rather than how you actually use the space. A 70% rent ratio for a desk in the corner of your bedroom would require evidence supporting that level of business use.

Others I see a lot:

  • Changing the ratio with no change in how you live or work, or without recording why
  • Apportioning things that aren’t really mixed. Your personal Netflix isn’t a research expense.
  • Deducting mortgage principal. For an owned home, the business share is generally of mortgage interest, depreciation, property tax and so on, not the principal. It can also interact with the housing loan deduction (住宅ローン控除), so get advice here.
  • Paying from a personal account with no trail. It’s legal, but it makes your records harder to follow. A dedicated business card helps a lot.

FAQ

Q: Can I deduct rent if I work from a corner of my living room, not a separate room?

Often yes, but the basis gets weaker and the ratio should be smaller. Measure the space you actually use for work, combine it with working hours if that helps, and write down your reasoning. A dedicated room is easier to defend.

Q: Does my spouse’s income or their name on the lease affect kaji anbun?

Not directly. Your spouse’s earnings don’t set your allocation percentage, and the name on the contract isn’t decisive on its own. What matters is whether the expense is actually a cost of your business. Rent or bills paid to an outside party, such as a landlord or a utility, can be apportioned in the usual way. It’s different if your spouse owns the home and you pay rent to them while sharing a livelihood (生計を一にする): that rent is generally not deductible. Instead, qualifying underlying costs, such as the business share of the property’s depreciation or property tax, may be deductible. If the lease or bills aren’t in your name, check with a 税理士 before you claim.

Q: Do I need to submit my apportionment calculation with my tax return?

Generally you don’t attach it. You enter the business portion in your books and keep the calculation and receipts on file. If the tax office asks, you show them.

This post is for informational purposes only and does not constitute legal or tax advice. Please consult a qualified professional for your specific situation.