RetireJapan

concerned wrote: ↑Thu Oct 20, 2022 11:16 am Hi,
I own a house in Japan which I rent out to tenants, I pay pretty hefty tax on the rental profit, but I see others mentioning they actually get tax back..
Maybe I am not offsetting enough expenses to reduce my tax and was wondering what others are submitting as expenses to offset their tax liability?

Right now I offset the following against tax:
Loan interest
Repairs related to the house
If I get the train to that area I will submit that expense
Agent fee to let the property

Thanks

Tkydon wrote: ↑Fri Oct 21, 2022 2:52 pm If the house is a timber framed structure, then the Standard Depreciation is 22 years.
For Interior Fixtures and Fittings, the Standard Depreciation is 15years.
You cannot depreciate the land, obviously...

How old is the house? How long have you been renting it out?
You need to work out how much of the purchase price was allocated to the structure vs the land.
If you bought the property new, then simply divide the Consumption Tax paid by the percentage Consumption Tax Rate applicable at the time of purchase.
You can then deduct 1/22 of that value every year as the Depreciation Expense.
This should convert the profit to a big loss, which you can then deduct from your Taxable Income, producing a big Tax Rebate every year.
There are strict rules about the records you need to keep.

If you take the depreciation expense, it reduces the Tax Basis from the Purchase Price paid by that amount every year, so if you sell in the future, you will have to pay Capital Gains Tax on any profit over that reduced Tax Basis.

You should talk to your Rental Agent and a Tax Accountant Professional.

concerned wrote: ↑Sat Oct 22, 2022 11:43 pm

Tkydon wrote: ↑Fri Oct 21, 2022 2:52 pm If the house is a timber framed structure, then the Standard Depreciation is 22 years.
For Interior Fixtures and Fittings, the Standard Depreciation is 15years.
You cannot depreciate the land, obviously...

How old is the house? How long have you been renting it out?
You need to work out how much of the purchase price was allocated to the structure vs the land.
If you bought the property new, then simply divide the Consumption Tax paid by the percentage Consumption Tax Rate applicable at the time of purchase.
You can then deduct 1/22 of that value every year as the Depreciation Expense.
This should convert the profit to a big loss, which you can then deduct from your Taxable Income, producing a big Tax Rebate every year.
There are strict rules about the records you need to keep.

If you take the depreciation expense, it reduces the Tax Basis from the Purchase Price paid by that amount every year, so if you sell in the future, you will have to pay Capital Gains Tax on any profit over that reduced Tax Basis.

You should talk to your Rental Agent and a Tax Accountant Professional.

The house is a Sekui House Pre-Fab, special type of concrete (Tekiten??)
I bought it 5 years ago, and it was 23 years old when I bought it. (26,000,000)
The land is half the total value and as you say not subject to depreciation, which explains why I do not save so much depreciation to set against the tax then...

I will have to get a bit more creative in offsetting expenses (Legally of course).
A couple of years ago, I was able to offset 1/3 the purchase price of a car I bought. The year before I offset 1/2 the price of bicycle
Maybe this year I will try and offset my Japan lesson expenses, the argument being I need Japanese to communicate effectively with the letting agent...