Guide to Tax Filing for Side Jobs
Side income as an employee: do you need to file or not? A complete overview
From a correct understanding of the "¥200,000 rule" to judging your income category, claiming expenses, and preventing your employer from finding out via residence tax, we clearly explain the filing knowledge every employee with a side job should know.
Cases where filing is required
The precise meaning of the "¥200,000 rule" and cases that need care even when filing is not required.
Check firstIncome category of a side job
Business income, miscellaneous income, employment income — the categories differ by type of side job.
ImportantWhat can be claimed as expenses
The range of expenses deductible from side-job income and the key points of home-use apportionment.
Tax savingThe filing process
Tax return filing for employees with a side job: annual schedule and required documents.
StepsResidence tax and avoiding disclosure
How a side job gets exposed to your employer, and how to apply for residence-tax self-payment (futsu-choshu).
CautionTax-saving techniques for side jobs
Making use of loss offsetting, blue-form filing, and the Small Enterprise Mutual Aid.
Tax savingCases where filing is required
Employees generally settle their taxes through year-end adjustment, but if you have a side job, there are cases where you must file a tax return.
When a salaried worker (employee) earns income other than salary (such as side-job income), a tax return is required once that total exceeds ¥200,000 per year.
※ The "income" here is not sales (revenue) but revenue − expenses ＝ income. If expenses are large, it can fall to ¥200,000 or less.
- Side-job income (revenue − expenses) exceeds ¥200,000 per year
- You receive salary from two or more places (the non-main one exceeds ¥200,000)
- Salary income exceeds ¥20 million per year
- You must file for another reason, such as the medical expense deduction or the mortgage loan credit (first year)
- Your side job runs a loss you want to offset against other income
- Side-job income is ¥200,000 or less → no income-tax return required
- However! A residence tax declaration is still separately required
(the obligation to file with your municipality remains) - Sales from handmade goods or flea-market apps (transfers of everyday items are non-taxable, but judgment is needed)
- Profit on sales via apps like Mercari (in principle miscellaneous income, or non-taxable)
If you do not file a tax return, your side-job income is not reported to your municipality. Because residence tax follows your income, it cannot be calculated correctly without a declaration. Filing a tax return automatically feeds through to residence tax, but if you do not file a tax return, you must separately submit a residence tax declaration (a residence tax return form) to your municipality.
Filing-requirement check by type of side job
| Type of side job | Income category | File if over ¥200,000 | Notes |
|---|---|---|---|
| Blogging / affiliate | Miscellaneous or business income | Required | Business income if ongoing and large in scale |
| Freelance / contract work | Business or miscellaneous income | Required | Business income if you keep books |
| Uber Eats / delivery work | Business or miscellaneous income | Required | Car and motorbike costs can be claimed as expenses |
| YouTube / video streaming | Miscellaneous or business income | Required | Equipment and software costs can be claimed as expenses |
| Gains on selling stocks / mutual funds | Capital gains | In principle not required (specified account with withholding) | File for a general account or to carry forward losses |
| Real estate rental income | Real estate income | Required | Repair and management costs can be claimed as expenses |
| Mercari, etc. (sale of everyday items) | Non-taxable in principle | Not required | Brand-name goods, antiques, etc. are taxable |
| Handmade sales / minne | Miscellaneous or business income | Required | Material costs can be claimed as expenses |
| Part-time work | Employment income | Required (when a non-main employer exceeds ¥200,000) | File based on the withholding slip |
Income category of a side job
Which "income category" your side-job revenue falls into greatly changes the tax calculation and available tax-saving methods. The most important question is whether it is "business income" or "miscellaneous income."
- A loss can be offset against employment income (leading to a refund)
- A loss can be carried forward for 3 years
- You can use the blue-form special deduction (up to ¥650,000)
- You can enroll in the Small Enterprise Mutual Aid
- Conducted continuously and repeatedly
- You keep books (records of income and expenses)
- It is profit-seeking and independent (run as a business)
- Revenue is roughly over ¥3 million per year (a rough guide)
- Even if you run a loss, it cannot be offset against other income
- A loss cannot be carried forward
- The blue-form special deduction is not available
- Side-job revenue is ¥3 million or less per year with no books
- One-off, non-continuous income
- Income that does not fit another category (salary, real estate, etc.)
Under the 2022 tax reform, side-job revenue is now judged to be miscellaneous income if it is ¥3 million or less per year and no account books are kept (a National Tax Agency directive). Put another way, keeping books raises the likelihood of being recognized as business income. It is important to keep records using accounting software such as freee or Money Forward.
Summary of income categories for major side jobs
| Type of side job | Main income category | Loss offsetting | Blue-form filing |
|---|---|---|---|
| Freelance / contract work (ongoing) | Business income | Possible | Possible |
| Blogging / YouTube (ongoing, with books) | Business income | Possible | Possible |
| Affiliate / points income | Miscellaneous income | Not possible | Not possible |
| Real estate rental | Real estate income | Possible (some limits) | Possible |
| Stocks / FX | Capital gains / miscellaneous income | Only among the same kind | Not possible |
| One-off spot projects | Miscellaneous income | Not possible | Not possible |
What can be claimed as expenses
Tax is charged on the "income" that remains after deducting expenses from your side-job revenue. Claiming expenses correctly reduces the amount subject to tax. Expenses can be claimed under either business income or miscellaneous income.
| Type of expense | Examples | Points to note |
|---|---|---|
| Communication costs | Smartphone and Wi-Fi costs used for the side job | Apportion by business share if also used privately |
| Transport / travel | Travel for interviews, deliveries, meetings | Keep IC-card statements and receipts |
| Supplies | PC, camera, peripherals (under ¥100,000) | Apportion if also used for your main job |
| Rent | Rent for workspace (home-use apportionment) | Apportion by floor-area ratio; coworking is fully claimable |
| Outsourcing costs | Fees for outsourced design or editing | Note withholding obligations when outsourcing to individuals |
| Advertising costs | Social-media ads, portfolio-site costs | Applies to what is used to promote the side job |
| Training / books | Books, seminars, Udemy, etc. related to the side job | Limited to side-job topics unrelated to your main job |
| Materials / purchases | Handmade materials, stock for resale | Exclude period-end inventory via stocktaking |
| Fees | Crowdsourcing and e-commerce site fees | Check on the platform's statements |
| Software | Monthly fees for design or video-editing software | Fully claimable if side-job only; apportion if shared |
※ If this "income" is ¥200,000 or less, no tax return is required (a residence tax declaration is still separately required).
※ For business income, you can further deduct the blue-form special deduction (up to ¥650,000).
The filing process
For an employee with a side job, the tax return combines the withholding slip received from the employer with the income and expenses of the side job.
Record sales and expenses as they occur. Keep receipts, invoices and transfer statements. Cloud accounting software makes this efficient.
The employer settles the salary portion through year-end adjustment. Since the side-job portion is filed separately in your tax return, do not include side-job income in the year-end adjustment.
The withholding slip arrives from your employer. A payment record may also arrive from a side-job client (even if it does not, calculate and file it yourself).
Prepare it using the National Tax Agency's "Tax Return Preparation Corner" or e-Tax. Combine employment income (from the withholding slip) and side-job income.
Submit via e-Tax (smartphone/PC), by post, or at the tax office counter. e-Tax is the fastest and easiest, and is recommended.
If additional tax is due, pay it by March 15 (direct debit is in late April). Any overpayment is refunded to your account.
Documents needed to file (an employee with a side job)
Issued by your employer by the end of January. Shows salary income and tax withheld.
Transfer statements, copies of invoices, payment records, etc. For crowdsourcing, check the transaction statements.
Proof of spending used for the side job. Digital storage is fine (compliant with the Electronic Books Preservation Act).
My Number Card, or the notification card plus ID.
Needed if you are due a refund. Check via your bankbook or cash card.
Needed when filing as business income. Accounting software can generate this automatically.
Residence tax and avoiding disclosure
Many people worry that "my side job might be found out by my employer," but the main cause of disclosure lies in the residence tax notice. Understand the mechanism and handle it correctly.
How a side job gets exposed to your employer
Pay the side-job residence tax yourself via "self-payment" (futsu-choshu)
The tax return has a field for choosing how to pay your residence tax. By setting the side-job portion of residence tax to "pay it yourself (futsu-choshu)", you separate the side-job portion from what is notified to your employer.
The residence tax including the side-job portion is deducted from salary via the company. There is a risk of being found out because the person in charge sees the amount.
You pay the side-job residence tax directly yourself. Only the employment-income portion is notified to the company, so it is less likely to be found out.
In the "Matters concerning residence tax and enterprise tax" field on the tax return (page 2), select "pay it yourself" for "method of collecting residence tax on income other than salary and public pensions." The same screen lets you set it when filing via e-Tax.
- Even when the aim is not for the side job to be revealed, if the contracting client shares employee information
- When the side-job client is a competitor and it touches on a non-compete obligation
- When you publish information on social media or a blog that can identify your company name or job duties
- Municipalities that do not allow self-payment of residence tax (some local governments require special collection only for employees in principle)
If side jobs are prohibited by your work rules, first consult your company or check the rules before anything else.
Tax-saving techniques for side jobs
Here we summarize the tax-saving measures available to employees with a side job. What you can use varies by income category and circumstances.
If your side job runs a loss (revenue < expenses), you can offset it against employment income (for business income or real estate income). This lets you obtain a refund of the tax withheld from your salary.
If your side job qualifies as business income, you can claim the blue-form special deduction (up to ¥650,000), just like a sole proprietor. You can apply it simply by keeping books and submitting an "Application for Approval of Blue Return" to the tax office.
- The side job qualifies as "business income" (ongoing, with books)
- You have submitted a business-opening notification (notification of opening/closing a sole proprietorship) to the tax office
- You have submitted the Application for Approval of Blue Return (within 2 months of opening)
If you have submitted a business-opening notification for your side job and file it as business income, you can enroll in the Small Enterprise Mutual Aid. You can fully deduct up to ¥70,000 per month (¥840,000 per year) from income, saving tax while building retirement funds.
| Employee only (no side job) | Employee + side job (business income) | |
|---|---|---|
| iDeCo | (up to ¥23,000/month) | (up to ¥23,000/month) |
| Small Enterprise Mutual Aid | (up to ¥70,000/month) | |
| Blue-form special deduction | (up to ¥650,000) |
By purchasing in December the equipment, services or training you need for your side job, you can claim them as expenses for the current year. Buying in January of the next year would make them next year's expenses, so bringing necessary spending forward at year-end is a basic tax-saving move.
※ When the side-job income is business income, the blue-form special deduction and the Small Enterprise Mutual Aid contribution deduction can be deducted additionally.
※ A side-job loss (business income) can be offset against employment income, moving taxable income in the negative direction.
Learn more in related columns
FAQ
If my side-job income is ¥200,000 or less, do I have to do nothing?
Even if no income-tax return is required, a residence tax declaration is in principle still required. If you file a tax return for another reason, you include it even at ¥200,000 or less.
Can I keep it from being found out by my company?
There is a way to choose "pay it yourself" for residence tax on the tax return. If the side job is salary, it may not be possible to separate it.
How do business income and miscellaneous income differ?
Whether account books are kept is the main criterion. With books it is generally business income; without them it is miscellaneous income related to a business.
Sources / official information
This article is based on the official information below. Rules may be revised; please check each official site for the latest details.
- National Tax Agency — Tax Answer No.1900: Employees who must file a tax return (in Japanese)
- National Tax Agency — Tax Answer No.1904: Filing requirements for certain income (in Japanese)
- National Tax Agency — Tax Return Preparation Corner (in Japanese)
- e-Tax (National Tax Electronic Filing and Payment System) (in Japanese)
※ The contents of this article are for information purposes only and are not tax or legal advice. For individual tax matters, consult your local tax office or a licensed tax accountant (zeirishi).