Triggered by tax-accountant and CPA YouTubers, we've entered an era where knowing the rules — or not — makes a real difference in take-home pay. This article picks out only the buzz-worthy tax and social-insurance optimization tricks that can be verified against primary sources (published materials from the NTA, Ministry of Finance and METI), and walks through how each one works, its effect, and its risks. These are not loopholes or evasion — the point is to legally use the rules the system already provides, to the full.
1. The Basics: The "Annual Income Wall" Rises to 1.78 Million Yen From 2026
Under the FY2026 tax reform outline published in December 2025, the minimum income-tax threshold is being raised further. The basic deduction rises from 580,000 to 620,000 yen, and the minimum employment income deduction from 650,000 to 690,000 yen; combined with a top-up special measure for low- and middle-income earners, the "wall" for salary income — previously around 1.6 million yen — rises to 1.78 million yen for the 2026 and 2027 tax years. This reform also introduces, for the first time, an automatic "price-slide" review of deduction amounts every two years, indexed to the rate of consumer price increases over the preceding two years.
Practical point: the "hours worth working" line for part-time and casual workers moves significantly, but the social insurance walls (1.06 million yen and 1.30 million yen) remain separate and unchanged. If you increase your shifts based only on the tax wall, you can land in a "reversal zone" where enrolling in social insurance changes your take-home pay — so a household-wide simulation is essential. See also the basics of filing a tax return and our simulator.
2. Extending the Invoice "20% Special Measure" by Nearly a Year With an August Fiscal Year-End
Small businesses that became taxable operators (from tax-exempt status) because of the invoice system can use the "20% special measure," under which they only need to remit 20% of the consumption tax charged on sales — but this measure ends after "the taxable period that includes September 30, Reiwa 8 (2026)" (National Tax Agency).
What's drawing attention here is a technique made widely known by otaku accountant Shinya Yamada: changing your fiscal year-end to August. Under the rule, any fiscal year that includes even a single day of September 30, 2026 has its entire fiscal year covered by the 20% special measure. Using this feature, a company can legally maximize the period during which the measure applies.
| Fiscal year-end | Last fiscal year eligible for the 20% special measure | Effective end date |
|---|---|---|
| Keep March year-end | April 2026–March 2027 period (includes Sept 30) | March 2027 |
| Switch to August year-end | September 2026–August 2027 period (includes Sept 30 at the start of the year) | August 2027 |
| Sole proprietors | 2026 tax year (calendar year) | December 2026 (cannot be changed) |
Changing your fiscal year-end is completed with a resolution to amend the articles of incorporation at a shareholders' meeting and a notification of change filed with the tax office — no registration is required. The cost is close to zero, while the effect — extending by nearly a year the period during which tax is a fraction of what it would be under principle taxation — is substantial. That said, be aware that businesses whose busy season falls in August will face a heavier year-end closing workload, and the transition year will be a shortened fiscal period. Note also that after the 20% special measure ends, the government has signaled a plan to introduce a "30% special measure" limited to sole proprietors for the 2027 and 2028 tax years (corporations are expected to be excluded — check the latest published information). The basics of the invoice system are covered in Invoices and tax-exempt operators.
3. Small Depreciable-Asset Write-Off Rises From 300,000 to 400,000 Yen: Buy From April 2026
The "special measure for small depreciable assets" (which lets you expense the full cost at once) available to SMEs and blue-return sole proprietors is being expanded under the FY2026 tax reform.
| Item | Current (acquired by March 31, 2026) | After reform (acquired on or after April 1, 2026) |
|---|---|---|
| Cap per unit | Under 300,000 yen | Under 400,000 yen |
| Annual total cap | 3 million yen | 3 million yen (unchanged) |
| Employee-count requirement | 500 or fewer | 400 or fewer (tightened) |
| Deadline | March 31, 2026 | March 31, 2029 (extended 3 years) |
The core of the trick is the "acquisition date": the new threshold applies based not on the fiscal year but on "assets acquired on or after April 1, 2026." In other words, a 350,000-yen laptop bought in March 2026 must be depreciated over four years, while the same laptop bought in April can be expensed in full in that period. If you're planning to buy equipment, a PC, a camera or similar in the 300,000–400,000 yen range, simply shifting the purchase by a few weeks can compress your taxable income. Note that the old and new rules will coexist within the same fiscal year, which requires care in bookkeeping.
4. Optimizing Social Insurance Premiums With the "Dual-Wield" Micro-Corporation + Sole Proprietorship Setup
One of the biggest fixed costs for a sole proprietor is National Health Insurance premiums, which rise in proportion to income and can exceed 1 million yen a year at the cap. The countermeasure known as the "dual-wield" scheme is to keep running your sole proprietorship while separately setting up a small corporation (a "micro-corporation") and enrolling in employees' social insurance through the corporation.
- Setting your director's compensation at the lowest bracket (around 45,000 yen a month) keeps combined employer-and-employee health insurance and employees' pension premiums to under 300,000 yen a year (rates vary by prefecture and year)
- Enrolling in the corporation's health insurance means you can legally withdraw from National Health Insurance. The gap widens the higher your income, and in some cases the premium difference runs into the hundreds of thousands of yen a year
- On the sole-proprietorship side you can still use the blue-return special deduction (up to 650,000 yen), and director's compensation from the corporation gets a separate employment income deduction (minimum 650,000 yen, rising to 690,000 yen from the 2026 tax year), so a low director's salary can effectively be received tax-free
- Because you're enrolled in employees' pension, your future pension benefits actually increase compared with National Pension alone, and you also gain coverage such as sickness and injury allowance
The break-even point for incorporation and specific figures are covered in detail in Micro-corporations and social insurance and Timing your incorporation.
5. Director's Company Housing: The Classic Technique for Expensing 50–90% of Your Rent
Once you have a corporation, the first thing to consider is director's company housing. By switching your home rental contract into the corporation's name and having the director pay the corporation the "rent-equivalent amount" calculated under the tax-law formula (often just 10–20% of the market rent for a small home), the remainder of the rent can be expensed by the corporation (NTA Tax Answer No. 2600).
Because rent that was previously paid out of after-tax take-home pay can instead largely be paid out of pre-tax corporate profit, the effect scales with how much you spend on housing. Three points to watch: (1) the lease must be in the corporation's name — a rent subsidy on a lease still held personally is taxed as salary; (2) if the director doesn't pay the rent-equivalent amount, it's taxed as a benefit in kind; and (3) luxury company housing (over 240 square meters, etc.) is excluded.
6. Protecting Business-Income Status for Side Businesses With "Bookkeeping": The Final Rule on the 3-Million-Yen Problem
In 2022, the National Tax Agency proposed a draft directive treating all side-business income of 3 million yen or less as uniformly "miscellaneous income" — a move that drew a firestorm of over 7,000 public comments and was ultimately withdrawn. This became known as the "side-business 3-million-yen problem." The rule that was finally settled is as follows:
- If you prepare and keep account books, your income is treated in principle as business income even at 3 million yen or less (letting you use the blue-return special deduction, carry forward losses, offset losses against other income, and other benefits)
- Without account books, the income is in principle treated as miscellaneous income (none of the above benefits apply)
In short, the single most powerful hack for protecting your tax benefits is simply "keep the books." That said, the directive explicitly states that income can still be classified as miscellaneous even with books kept, in cases such as (1) continued losses with no effort toward profitability, or (2) income that is negligible, under 10% of your main employment income. Filings aimed at engineering side-business losses to offset salary income and claim a refund carry a high risk of being denied. See Side businesses and taxes for employees for more detail.
7. Inheritance Hacks in the Era of the "7-Year Rule" for Lifetime Gifts: Gifts to Grandchildren and the New Consolidated Taxation Regime
Starting in 2024, the period during which calendar-year gifts made before death are added back into the estate was extended from 3 years to 7 years (full application begins with inheritances from 2031 onward; the additional 4 years carry a combined allowance of 1 million yen). As the effect of steady 1.1-million-yen annual gifting fades, experts point to three countermeasures:
- Start as early as possible: the add-back only covers "the 7 years before death." Starting gifts earlier — from your 60s or 70s — is the basic strategy
- Use gifts to "people who are not heirs": the add-back rule in principle only covers people who acquire property through inheritance (children, spouse, etc.). Gifts to grandchildren or a child's spouse fall outside the 7-year rule. Watch out, though: if a grandchild is named in a will as a bequest recipient, or designated as a life insurance beneficiary, they become a "person who acquires property" and get caught by the add-back rule after all
- Consider the revamped lifetime gift tax settlement (sozoku-jisei seisan kazei) regime: the 2024 reform added a new annual basic deduction of 1.1 million yen, and gifts within this allowance require no filing and are not added back. Whether calendar-year gifting or this settlement regime is more advantageous depends on the size of your assets and your age
See Inheritance tax basic deduction and tax-saving strategies and The gift-tax tax-free allowance for the full picture.
Do this today
- Write down your (or your company's) fiscal year-end, any major planned purchases, and your annual insurance premiums on a single sheet
- Prioritize the hacks that apply to you (start with the highest-impact ones: the 20% special measure, the 400,000-yen threshold, and the micro-corporation setup)
- Before acting, confirm eligibility with a tax accountant or other specialist
More actions: the Take-Home Boost Checklist.
Frequently Asked Questions
Q. Is extending the 20% special measure by changing your fiscal year-end illegal?
A. No, it is not illegal. Changing your fiscal year-end is a procedure a company is free to choose, and the extended eligibility period is simply a consequence of following the rule "applies through the taxable period that includes September 30." That said, be sure to consider practical issues in advance, such as the transition-year fiscal period being under one year and the burden of a year-end closing coinciding with your busy season.
Q. From roughly what income level is the micro-corporation dual-wield strategy worth considering?
A. Generally, once sole-proprietorship income exceeds around 5–6 million yen, the National Health Insurance savings tend to outweigh the cost of maintaining a corporation (the flat-rate local tax, tax accountant fees, etc. — roughly 200,000–300,000 yen a year). The effect varies significantly by income, family composition, and your municipality's premium rates, so always run the numbers for your own situation.
Q. Can sole proprietors also use the under-400,000-yen special measure?
A. Yes. It's available to blue-return SMEs and similar small businesses, which includes sole proprietors. For assets acquired on or after April 1, 2026, the cap is expanded to under 400,000 yen, and the annual total cap of 3 million yen is unchanged. Note that it cannot be used with white-return (non-blue) filing.
Q. I've heard that generating a side-business loss to offset it against salary income saves tax — is that true?
A. Offsetting losses against other income is legitimate as long as the activity is recognized as business income, but the directive explicitly states that if losses continue with no effort to improve profitability, or if income is negligible — under 10% of your main employment income — it will be classified as miscellaneous income even with books kept, and the offset will not be allowed. Deliberately engineering a loss carries a high risk of denial and back taxes.
Q. Up to how much can I gift a grandchild tax-free?
A. The calendar-year gift tax-free allowance is 1.1 million yen per year, per recipient. Grandchildren are in principle excluded from the 7-year add-back rule, but they become subject to it if named as a bequest recipient in a will or as a life insurance beneficiary. Other special allowances, such as lump-sum gifts for education expenses, can also be combined — consult a specialist for the best combination.
- National Tax Agency: 20% special measure special page (applicable period: through the taxable period that includes September 30, Reiwa 8) (Japanese)
- METI: Expansion of the small depreciable-asset special measure (to under 400,000 yen) (Japanese)
- Ministry of Finance: Tax reform outline (FY Reiwa 8: 620,000-yen basic deduction, 690,000-yen employment income deduction, price-slide) (Japanese)
- National Tax Agency No. 2600: Providing company housing to a director (Japanese)
- National Tax Agency: Revision of the income tax basic directive (income classification and bookkeeping for side businesses) (Japanese)
- National Tax Agency No. 4161: Addition of gifted property (add-back of lifetime gifts) (Japanese)
This article is general information and is not a solicitation to carry out any particular technique. Effectiveness and eligibility vary by individual circumstances, and the tax system may change in future reforms. Always consult a tax accountant (zeirishi), social insurance and labor consultant (sharoushi), or other specialist before acting. The Japanese version and official sources are authoritative.