Can you save 10%? What is the ultimate tax-saving hack for salarymen? Company establishment, side hustles! Explaining strategies beyond real estate
Many people are likely thinking, "Isn't there an 'ultimate' tax-saving strategy that even a salaryman can use?"
Even for company employees whose taxes are difficult to control because they are deducted from their salaries, there are multiple ways to legally increase take-home pay.
In this article, we will clearly explain realistic measures, ranging from specific systems that can be used based on annual income to in-depth strategies like real estate investment and side hustles.
📄 Summary of article points
The ultimate tax-saving strategy for salarymen is a combination of "maximizing deductions x asset formation."
iDeCo and the mortgage deduction have high tax-saving effects.
The higher the annual income, the greater the effect of utilizing real estate investment and side hustles.
Investment solely for tax-saving purposes is dangerous. It is important to judge based on the overall balance of income and expenditure.
Basic knowledge of tax saving that salarymen should know
To avoid losing money through tax saving, we will first grasp "why it is necessary" and "the boundary of what you must not do."
Understanding this will keep you from wavering when choosing systems and make it easier to spot dangerous tax-saving schemes.
Why tax saving is necessary for salarymen now
The reason tax saving is necessary for salarymen is that as income increases, the tax rate rises, and much of the increase is deducted as tax.
For example, when taxable income exceeds 9 million yen, a 10% inhabitant tax is added to the 33% income tax.
If you earn an additional 1 million yen, about 430,000 yen of that becomes tax, leaving you with a level of about 570,000 yen.
Although the actual tax amount changes depending on various deductions and tax credits, the "value of 1 yen of deduction" becomes greater for those in higher tax brackets.
Source: National Tax Agency | No. 2260 Income Tax Rates
Correctly understanding the difference between "tax saving" and "tax evasion"
Tax saving is reducing the tax burden by using deductions and tax-exempt systems recognized by law.
Tax evasion is avoiding taxes through illegal acts such as concealing sales or income, or using fictitious expenses.
For example, keeping receipts that qualify for medical expense deductions and filing them is tax saving.
On the other hand, creating receipts for expenses you didn't actually pay to claim them is tax evasion.
While proper tax saving is not illegal, it is important to thoroughly understand the rules so that you do not commit tax evasion.
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Standard tax-saving measures for salarymen and the reality of their effects
Typical tax-saving measures that salarymen can realistically use are as follows.
I will explain each one in detail.
Dependency Deduction / Spousal Deduction
The dependency deduction and spousal deduction are systems that can reduce income tax and resident tax when you are supporting family members.is.
A deduction is a mechanism that subtracts a certain amount from the income subject to taxation.
Because taxable income decreases, the tax amount is reduced by the amount multiplied by the tax rate.
For example, even if the taxable income is the same, if the deduction increases by 380,000 yen, the base for taxation becomes smaller by that amount.
The amounts for the spousal deduction and dependency deduction starting from the 2025 fiscal year are as follows.
Spousal Deduction
Dependency Deduction
The dependency deduction, spousal deduction, and special spousal deduction have their deduction amounts determined by the number of dependents, their ages, and the spouse's income status.
Since you can file these during the year-end adjustment, forgetting to submit the declaration form is the biggest point where you are likely to lose out.
Housing Loan Deduction
The housing loan deduction is a system where income tax is reduced according to the year-end balance of your housing loan.is.
In principle, 0.7% of the year-end balance is the guideline for the deduction amount, which is subtracted from the tax amount over a certain period (up to 13 years).
For example,if the year-end balance is 30 million yen, the potential deduction is a maximum of 210,000 yen by simple calculation.is.
However, since the deduction period and limits change depending on whether it is a new or used home and the performance requirements of the house, checking the conditions before purchase is essential.
You need to file a tax return for the first year, and you can handle the procedures through year-end adjustment from the second year onwards.
While the tax-saving effect is significant, since purchasing a home itself leads to increased spending, it is not a system to be used "solely for tax-saving purposes."
Source:National Tax Agency | No. 1212 Special Deduction for Housing Loans, etc.
iDeCo (Individual Defined Contribution Pension)
iDeCo is a system for preparing retirement funds by contributing your own premiums.
Its greatest strength is that the entire contribution amount is tax-deductible.
For example, if you contribute 20,000 yen per month, 240,000 yen per year becomes tax-deductible, reducing your income tax and resident tax accordingly, and investment gains are also tax-free.
Since the 'value of the deduction' increases as your tax rate rises, the tax-saving impact is greater for those with higher incomes.
On the other hand, since you generally cannot withdraw funds until age 60, it is safer to start only after securing your emergency fund.
Source: iDeCo Official Website
Tsumitate NISA / New NISA
The New NISA is a tax-free system where profits earned from investments are not taxed.
Normally, profits from stocks and investment trusts are taxed at approximately 20%.
Since this tax becomes zero within the New NISA allowance, the difference grows as your profits accumulate.
For example, if you have a profit of 1 million yen, the tax would normally be about 200,000 yen, but if it is tax-free, that amount remains in your pocket.
Because it is not a system that directly lowers income tax itself, it is a tax-saving measure that 'protects investment gains' rather than 'increasing take-home pay'.
Source: Financial Services Agency NISA Special Site
Life Insurance Premium Deduction / Earthquake Insurance Premium Deduction
The Life Insurance Premium Deduction is a system where you can receive an income deduction based on the premiums paid.
Under the new system (contracts from 2012 onwards), there are caps for each category, and up to 120,000 yen is eligible for deduction for income tax purposes.
The Earthquake Insurance Premium Deduction also allows for an income deduction based on the amount paid, with a maximum cap of 50,000 yen for income tax.
However, you should be aware that if you increase insurance just for tax savings, the burden of the insurance premiums is likely to be greater.
Medical Expense Deduction / Self-Medication Tax System
In years with high medical expenses, you may be able to reduce your taxes by filing a tax return using the Medical Expense Deduction or the Self-Medication Tax System.
Since you can only choose to apply one of the two, you should compare your annual expenditures and select the more advantageous system.
The Medical Expense Deduction is a system where, if the medical expenses paid in one year (January 1st to December 31st) exceed a certain amount, the excess portion can be deducted from your income.
Eligible expenses are those 'intended for treatment'.
Main examples of eligible items
Consultation fees and treatment costs from doctors or dentists.
Hospitalization and surgery expenses.
Costs for purchasing medicines necessary for treatment.
Transportation costs for public transit to visit medical facilities.
Infertility treatment costs and medical expenses during childbirth (out-of-pocket portion).
The calculation formula for the deduction is (Total annual medical expenses - Amount covered by insurance, etc.) - 100,000 yen.
However, if your total income, etc., is less than 2 million yen, the threshold is 5% of your total income, etc.
The maximum limit for medical expense deduction is 2 million yen.
A tax return is required, and you are required to keep medical expense notifications or receipts.
Source: National Tax Agency | No. 1120 When you have paid medical expenses (Medical expense deduction)
Self-Medication Tax System
The self-medication tax system is a system that can be used when individuals who are engaged in health maintenance, promotion, and disease prevention purchase eligible pharmaceuticals. is.
This is a separate framework from the regular medical expense deduction, and you can choose only one of the two.
Usage conditions
Must have undergone health checkups, vaccinations, or specific health checkups, etc.
Must have purchased eligible switch OTC drugs.
Annual purchase amount must exceed 12,000 yen.
Calculation formula for deduction
Eligible drug purchase amount - 12,000 yen.
The deduction limit is 88,000 yen.
A key feature is that it can be utilized even by households whose medical expenses do not reach 100,000 yen, provided they have high drug costs.
Since receipts indicate that the items are eligible pharmaceuticals, be sure to keep them.
Source: National Tax Agency | No. 1120 When you pay medical expenses (Medical Expense Deduction)
Furusato Nozei (Hometown Tax Donation Program)
Furusato Nozei is a system that allows you to receive deductions on resident tax and income tax through donations to local governments. is.
Within the limit, your out-of-pocket expense is generally 2,000 yen, and you receive return gifts while the donation amount is deducted from your resident and income taxes.
Since it is a mechanism where you pay money in the form of a donation, get that amount deducted, and receive return gifts, it does not strictly mean that the taxes you pay will decrease.
Because the donation limit varies depending on annual income and family structure, it is important to check the estimate before donating.
For salary earners who do not need to file a tax return, you can easily apply for the deduction using the One-Stop Exception system if you meet requirements such as donating to no more than five organizations.
Source: National Tax Agency | No. 1155 Furusato Nozei (Donation Deduction)
Specific Expenditure Deduction
The Specific Expenditure Deduction is a system that allows salarymen to deduct certain expenses they paid out-of-pocket for work, provided they meet specific conditions.
Eligible expenses may include commuting costs, work-related travel expenses, moving expenses, training expenses, qualification acquisition expenses, book expenses, clothing expenses, and entertainment expenses.
However, the hurdle is quite high, such as 'the total specific expenditures for the year must exceed half of the salary income deduction amount.'
Furthermore, since certification from your company is required, you will not be approved unless you are aware of the system and prepare early.
Source: National Tax Agency | No. 1415 Specific Expenditure Deduction for Salary Earners
Tax-saving effects of real estate investment
In real estate investment, you can record depreciation, repair costs, and the interest portion of loans as expenses.
If you can record expenses that are greater than your income, your income tax and resident tax burden may be reduced.
However, in reality, you must also consider the balance between income and expenses, as well as future capital gains or losses.
It is important to note that a deficit on the books does not necessarily mean a real-world profit, so this should not be done solely in the expectation of tax-saving effects.
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Tax measures that can be used in specific cases
In addition to systems that anyone can use every year, there are also systems that are highly effective in specific situations.
Since you can drastically reduce your tax burden in the year you qualify, knowing about them makes a big difference.
If you have incurred losses from stock trading
If you have incurred losses from the sale of stocks, ETFs, or investment trusts, you may be able to recover taxes.
The key points are "loss offsetting" and "three-year carry-forward deduction."
You can offset losses against profits or dividends from stocks in the same year (loss offsetting)
Losses that cannot be fully deducted can be carried forward for up to three years
You must file a tax return starting from the year the loss occurred
For example, if you have a loss of 1 million yen this year and a profit of 1 million yen next year, the tax that would normally cost about 200,000 yen (approx. 20.315%) becomes zero.
If you have divorced or been widowed
If you no longer have a spouse due to divorce or bereavement, you may be eligible for an income deduction if you meet certain requirements.
Single Parent Deduction
The single parent deduction is a system for single individuals supporting children, with a flat deduction amount of 350,000 yen.
Main eligibility requirements
You are not married, or you are widowed or divorced
You have a child who shares your household (with a total income of 480,000 yen or less)
Your total income is 5 million yen or less
There is no person in a relationship equivalent to a de facto marriage.
Since resident tax is also reduced, the total difference will be several tens of thousands of yen more.
A feature is that it applies regardless of gender.
Source: National Tax Agency | No. 1171 Single Parent Deduction
Widow Deduction
The widow deduction is a system for women who do not meet the requirements for the single parent deduction but meet certain conditions; the deduction amount is 270,000 yen.
Main eligibility requirements
You have been widowed or divorced from your husband and have not remarried.
Your total income amount is 5 million yen or less.
You do not meet the requirements for the single parent deduction.
For example, a woman without children who is widowed and has an income of 5 million yen or less may be eligible for the widow deduction.
If the tax rate is 20%, there is an income tax reduction effect of 270,000 yen x 20% = approximately 50,000 yen.
It cannot be used in conjunction with the single parent deduction.
It is easier to organize your thoughts by first using whether or not a child is a dependent as the criteria for judgment.
Source: National Tax Agency | No. 1170 Widow Deduction
In case of disaster or theft
If you have suffered damage to your assets due to a disaster or theft, you can use the following two systems.
Casualty Loss Deduction
The casualty loss deduction allows you to deduct an amount from your income after subtracting a certain amount from the loss. can be deducted.
Specifically, whichever of the following amounts is higher can be deducted as a casualty loss.
Calculation formula for deduction amount (representative example)
Loss amount - 10% of total income, etc.
Disaster-related expenses - 50,000 yen
Source: National Tax Agency | No. 1110 Casualty Loss Deduction
Reduction/Exemption under the Disaster Tax Reduction Act
The Disaster Tax Reduction Act is a system where income tax itself is reduced or exempted if you suffer significant damage to your home or household property.
Requirements such as income of 10 million yen or less apply
Depending on the damage ratio, half or the full amount of the tax may be exempted
Selective application with casualty loss deduction
In cases of severe damage, this may be more advantageous.
Source: National Tax Agency | No. 1902 Income Tax Reduction/Exemption under the Disaster Tax Reduction Act
If you have a side job
If a salaryman has a side job, there is a possibility that the tax burden can be reduced depending on the situation.
Blue Return Special Deduction
The Blue Return Special Deduction is a system that can be used when a side job is recognized as 'business income' is.
You can receive an income deduction of up to 650,000 yen (550,000 yen or 100,000 yen for simple bookkeeping).
Main conditions for application
The side job must qualify as business income
Must have submitted an 'Application for Approval of Blue Return' to the tax office in advance
Must prepare books using double-entry bookkeeping and submit a balance sheet and profit and loss statement (for the 650,000 yen deduction)
File your tax return within the deadline
For example, if you are continuously engaged in online sales, have monthly revenue, keep books, and operate it as a business, it may be eligible.
On the other hand, one-off manuscript fees or hobby-related income are classified as miscellaneous income, and the blue return special deduction cannot be used.
If you intend to continue your side hustle as a full-fledged "business," you should complete the blue return filing procedures early.
Source: National Tax Agency | No. 2072 Blue Return Special Deduction
Expense deduction and proportional allocation of household expenses
Expenses directly necessary to earn income from a side hustle can be deducted from your income as necessary expenses.
As expenses increase, taxable income decreases, which in turn reduces your taxes.
Typical examples of deductible expenses
Cost of goods sold
Advertising and promotion expenses
Business computer and software costs
Seminar participation fees and book costs (related to business)
Transportation expenses used for business
On the other hand, for expenses shared with private life, "proportional allocation of household expenses" is required.
Proportional allocation of household expenses is a method of claiming only the portion used for business as an expense.
For example, regarding communication costs used for both work and private life, you can claim the portion used for work as an expense.
However, if there is no reasonable basis for the allocation ratio, it may be denied.
The basis of tax saving for side hustles is not to "make everything an expense," but to "properly manage expenses necessary for business."
By annual income | Tax-saving strategies easy for salarymen to use
Here, we will organize 'which systems to combine and how for maximum effect' by income bracket in a simulation format.
As a premise, we estimate based on a 10% inhabitant tax and representative tax rates for each income bracket.
As annual income increases, the marginal tax rate rises, making the tax-saving effect greater even with the same deduction amount.
For salarymen with an annual income of around 4 million yen
For those with an annual income of around 4 million yen, dependency deductions, insurance premium deductions, and medical expense deductions are the easiest to start with.
Furthermore, using iDeCo, which allows for contribution deductions, in combination will increase the effect of reducing income tax and inhabitant tax.
Model case
Assumed tax rate: 20% income tax + 10% inhabitant tax = approx. 30%
iDeCo: 120,000 yen annual contribution
Life insurance premium deduction: 100,000 yen
Medical expense deduction: 200,000 yen
Example of tax savings for the above model case
In this income bracket, it is realistic to utilize iDeCo within a reasonable range and ensure that all applicable deductions are declared.
For salarymen with an annual income of 6 to 8 million yen
In this income bracket, the income tax rate begins to rise to 23%–33%, and the marginal tax rate combined with the 10% inhabitant tax becomes approximately 33%–43%.
Here, using an annual income of 7 million yen as an example, we will show a simulation combining the mortgage deduction, new NISA, dependency deduction, and various insurance premium deductions.
Premise (model case)
Annual income: 7 million yen
Marginal tax rate: Estimated at 33% (23% income tax + 10% inhabitant tax)
Mortgage year-end balance: 30 million yen (calculated with a 0.7% deduction)
Dependency deduction: General dependent relative (380,000 yen)
Life insurance premium deduction: Up to 120,000 yen
Earthquake insurance premium deduction: Up to 50,000 yen
New NISA: Case where investment gains are 100,000 yen per year
Example of tax savings for the above model case
For this income bracket, the basic strategy is to lower taxable income through dependency deductions and insurance premium deductions, while maximizing the impact of 'tax credits' like the mortgage deduction.
While the new NISA is not a system that directly lowers income tax, it is effective in the long term because it allows you to cut the approximately 20% tax on profits.
For salarymen with an annual income over 10 million yen
As annual income increases, the burden of income tax and resident tax grows, so maximizing iDeCo contributions and fully utilizing NISA quotas can easily lead directly to tax savings is the case.
When combining real estate investment, calculate the balance by estimating the effects of depreciation and expense deductions.
Model case
Assumed tax rate: Income tax 33% + Resident tax 10% = approx. 43%
Full iDeCo contribution: 276,000 yen
Life insurance premium deduction: 120,000 yen
Depreciation: 1 million yen (real estate investment)
For tax savings involving investment, you must always check the after-tax balance.
However, in this income bracket, there are cases where some deductions like the spousal deduction cannot be used, so it is necessary to be aware that 'not everyone can achieve the same tax savings'.
Rather than diving into high-risk investments solely for the sake of tax savings, you are required to make decisions while considering the balance between tax burden and your overall assets.
For salarymen with an annual income of around 20 million yen
When your annual income reaches around 20 million yen, your income tax rate enters the 40% bracket, and combined with the 10% resident tax, the actual burden becomes extremely heavy.
Since about half of any additional income is deducted as tax, this is a zone where the 'value of 1 yen in deductions' becomes significant.
Model Case
Assumed tax rate: 40% income tax + 10% resident tax = approx. 50%
iDeCo maximum contribution: 276,000 yen
Real estate depreciation: 1.5 million yen
Income splitting through incorporation: 2 million yen reduction
First, the basics are maximizing your iDeCo limit and preventing any missed opportunities for various income deductions.
Next, real estate investment and incorporation are often considered.
In real estate, there are cases where profit and loss can be offset using depreciation, but checking exit strategies and cash flow is essential.
Establishing a corporation has the potential for income splitting and expanding the scope of expenses, but fixed costs such as social insurance premiums and the per-capita levy of corporate resident tax will also arise.
It is important to make decisions by including not just the tax savings, but also the 'money remaining in hand' and 'time costs.'
Points to be careful about regarding tax-saving measures for salarymen
Tax saving is an effective means, but if you do it the wrong way, it will have the opposite effect.
Here, we will organize the points where people often fail.
'Tax saving' does not always mean 'profit'
If you increase unnecessary spending for the sake of tax savings, your cash on hand will decrease as a result.
For example, even if your taxes are reduced by 200,000 yen with an expenditure of 1 million yen, you are still paying 800,000 yen out of pocket.
It is important to think based on whether the expenditure is truly necessary.
Recording 'expenses without substance' is absolutely a no-go
When recording expenses for side hustles or real estate investment, the relevance to the business must be clear.
Fictitious expenses or excessive allocation of household expenses will be subject to denial or additional taxation.
In tax audits, 'substance' and 'evidence' are emphasized.
Keeping ledgers, receipts, contracts, etc., is the basic requirement.
Be careful of excessive tax-saving proposals through investment
It is dangerous to decide on an investment based solely on the sales pitch that 'it will save you taxes.'
Real estate and insurance products may result in a loss as an investment even if they have tax-saving effects.
The criterion for judgment is 'whether it will be profitable even after taxes.'
Check not only the taxes but also the comprehensive income and expenditure simulation.
Frequently asked questions about tax saving for salarymen
We will explain common questions about tax saving for salarymen in an easy-to-understand manner.
Is it true that I can save on taxes if I establish a company?
To start with the conclusion, it is possible to save on taxes if the conditions are met, but it is not necessarily advantageous for everyone.
Whether incorporating a business leads to tax savings depends largely on the 'scale of profit' and 'sustainability'.
Cases where tax savings are likely
Profits from side hustles or business are stably 5 million to 8 million yen or more per year
You can reasonably pay salaries to family members as officers or employees
You can retain earnings within the company instead of using them immediately
There are clear expenses that can be recorded
Cases where tax savings are difficult or likely to be counterproductive
Profits are unstable or around less than 3 million yen per year
Sales are small and cannot cover the costs of maintaining a corporation
You plan to receive all profits as executive compensation
You have not considered the increase in social insurance premium burdens
It is safer to perform a simulation and make a decision by comprehensively comparing taxes, social insurance, and maintenance costs before incorporating.
How much of side hustle expenses are acceptable?
Expenses are expenditures directly necessary to earn side hustle income.
Computer costs, advertising expenses, and purchase costs are expenditures that are easily eligible.
Rent and communication expenses are prorated based on business usage.
Expenditures that cannot be explained carry a risk of being denied, so it is important to have clear grounds.
From what annual income should you start thinking about 'tax savings'?
Preventing missed deductions is something everyone should do regardless of annual income.
On the other hand, income deduction-type systems like iDeCo become more effective as the tax rate increases.
As a guideline, you will start to feel the tax-saving effects more easily once your annual income exceeds 6 million yen.
Real estate crowdfunding if you want to increase income while saving on taxes
Tax saving is a measure to 'reduce expenditures', but there is a limit no matter how hard you try.
On the other hand, if you increase your income pillars, you can raise your take-home pay itself.
Especially for busy salarymen, it is important to know 'whether you can have a source of income without putting in effort'.
Real estate crowdfunding is a compatible option for that.
Reasons why real estate crowdfunding is recommended for salarymen
Real estate crowdfunding is a mechanism where real estate is acquired and operated with money collected from multiple investors, and rental income or capital gains are distributed.
Investors invest in a 'fund', and since the operator handles operation and management, a feature is that even salarymen can aim for returns close to real estate income.
The reasons why real estate crowdfunding is suitable for salarymen are as follows.
Because you can start with a small amount, you can gain investment experience without putting pressure on your household budget
Since you are not taking out a loan, there is no pressure from bank screenings or loan repayments.
Because the operator handles property searching, tenant relations, and repairs, it is easy to continue even if your main job is busy.
Many projects provide the investment period and expected yield in advance, making it easy to plan.
The appeal lies in the ability to not only 'reduce expenses' through tax savings but also 'increase income' through distributions, making it easier to accelerate improvements in your take-home pay.