Open Kitchen Tax Credit at Renovation: Decrease Income Tax for Child Care Assistance

Aki Japan Tax Consultant Office | Income Tax, Corporate Tax, VAT Back | Open Kitchen Tax Credit at Renovation: Decrease Income Tax for Child Care Assistance
Aki Japan Tax Consultant Office | Income Tax, Corporate Tax, VAT Back | Open Kitchen Tax Credit at Renovation: Decrease Income Tax for Child Care Assistance

Author Aki Kojima

Certified Public Tax Accountant with an MBA, member of the Association of Micro M&A Professionals, and licensed real estate agent. I provide tax advisory services, asset management consulting, and support for business owners, freelancers, and sole proprietors. I have extensive experience in international sales, accounting, labor relations, recruiting, and IT management. In addition to my professional work, I write articles and books on taxation and financial education. I enjoy swimming, reading, photography, and spending time in nature with my two children.

Individual & Freelancers

May 15, 2024

June 18, 2024

Today, I want to discuss the “Open Kitchen Tax Credit,” a tax credit program to support childcare. This program offers the advantage of reducing your income tax if you install an open kitchen or other equipment when renovation. If you are considering renovation, please check to see if you can use this credit.

Contents
  1. Overview of Income Tax Reductions
  2. Remodeling that qualifies for tax breaks
  3. Applicable Conditions
  4. Procedures for receiving tax breaks
  5. In Summary.

Overview of Income Tax Reductions

Aki Japan Tax Consultant Office | Income Tax, Corporate Tax, VAT Back | Open Kitchen Tax Credit at Renovation: Decrease Income Tax for Child Care Assistance

First, if you order an open kitchen and install it, we consider 1,477,720 yen as the renovation cost and you can deduct the cost when calculating your income tax.

Suppose the tax rate is 20%. The deducted amount will be approximately 30,000 yen. This reduction can be used to support childcare.

Even if the kitchen costs 600,000 yen, you can account for 1,477,200 yen. After examining the difference successfully, you should apply for the tax break. If you are familiar with filing tax returns, you can apply for the tax reduction by yourself. If you have hired a tax accountant, you must take the application documents, which will be introduced later, as soon as possible.

Remodeling that qualifies for tax breaks

Aki Japan Tax Consultant Office | Income Tax, Corporate Tax, VAT Back | Open Kitchen Tax Credit at Renovation: Decrease Income Tax for Child Care Assistance

I recommend the following three main types of remodeling that are eligible for this program.

Recommended Considerations

  1. open kitchen
    • You can account 1,477,200 yen cost with an open kitchen renovation.
  2. closet
    • If one set of bookcases or storage shelves is installed, 163,190 yen can be deducted at cost. It can be multiplied and applied. Income tax will be calculated for two sets by considering approximately 320,000 yen as renovation cost.
  3. partition wall
    • If you install partitions in anticipation of having more children, the cost is 154,200 yen for one. Considering the renovation cost, you can multiply this amount by two to get an income tax reduction of approximately 300,000 yen.
  4. Other
    • Others, in my personal opinion, are honestly not very user-friendly.

Many ready-built houses include drop walls, allowing homeowners to customize the number of rooms based on their needs. For instance, if necessary, a large room on the third floor can be divided into two or three smaller rooms. Installing a partition wall at renovation reduces the cost of creating these additional rooms. This flexible design feature is quite common in many houses.

If money is available, the water system may be remodeled after 10 years. As you raise your children, shelves will be demanded in storage. It would be practical to apply for this tax credit by making a good combination of a two-way kitchen, storage shelves, and partition walls.

For reference, other targets are as follows. It is not very easy to use. For example, it includes “replacement of cushion flooring.” But would you bother to hire a contractor to do this? If it were me, I would do it myself. This is because there is a high possibility that the floor will become unnecessary once the child-rearing period is over. Then, it needs to be removed. If you are going to remove it, it should be easy to install and easy to remove.

I don’t mind the possibility of a tax cut, but I wonder if the people who created this program were genuinely committed to child-rearing.

Reference for eligible remodeling

  • Construction works to improve the protruding corners of walls or pillars to a structure that contributes to the prevention of accidents caused by children crashing into them.
  • Replacement of floor finish material with a structure that prevents accidents caused by children falling
  • Replacement of cushion flooring
  • Replacement of shock-absorbing tatami mat flooring
  • Installation of handrails to prevent falls
  • Installation of balcony railings
  • Installation of handrails on windows above the second floor
  • Installation of handrails in corridors or stairways (limited to the open side) Installation of handrails in
  • Replacement of interior doors with doors of a structure that contributes to the prevention of accidents due to children’s fingers being caught in them
  • Installation of child fence
  • Off-the-shelf installation work
  • Replacement of electrical outlets with those that contribute to the prevention of accidents due to electric shock to infants
  • Replacement work for outlet with shutters
  • Relocation of electrical outlets to a height out of reach of infants
  • Replacement of the front door with a security door.
  • Replacement of security sash and glass
  • Installation of face grates
  • Replacement of the front door with a security door.
  • Replacement of security sash and glass
  • Installation of face grates

Applicable Conditions

Aki Japan Tax Consultant Office | Income Tax, Corporate Tax, VAT Back | Open Kitchen Tax Credit at Renovation: Decrease Income Tax for Child Care Assistance

The conditions for receiving this tax break are as follows

  1. age requirement
    • As of December 31 of the year, the renovation was performed one of the following.
      1. Age of the applicant or spouse is under 40 years old
      2. Must have dependents under the age of 19.
  2. Ownership and Residency Requirements
    • The property must be owned and occupied by the applicant. Spouse-owned or rented properties are not eligible.
  3. Property Size
    • This is for properties of 50 square meters or more.
  4. Eligible construction
    • This project covers the construction of an open kitchen, storage cabinets, partitions, etc.
  5. Fortification Costs
    • The amount spent on eligible construction must be 500,000 yen or more, excluding subsidies.
  6. Terms and conditions
    • Income must be less than 20 million yen. For salaried employees, the amount after deduction of employment income is eligible.
  7. Period of commencement of residence
    • Residence must be occupied within 6 months after completion of the renovation.

Procedures for receiving tax breaks

Aki Japan Tax Consultant Office | Income Tax, Corporate Tax, VAT Back | Open Kitchen Tax Credit at Renovation: Decrease Income Tax for Child Care Assistance

The procedure to receive the tax reduction is as follows

List of Procedures

  1. Obtaining a Certificate of Registered Matters(登記簿謄本)
    • The individual will obtain a Certificate of Registered Matters.
  2. Preparation of Certificate of Extension and Alteration
    • Obtain a certificate of addition or alteration prepared by an architect or other qualified person.
    • A template is available here, so please prepare it if you are an architect or other professional.
  3. Tax Return
    • A statement of calculation of the special tax credit for housing-specific renovation will be attached to the tax return.
    • An example of a calculation statement is here.
  4. The renovation contract
    • The contract issued by the renovation company is attached to the tax return.

In Summary.

Aki Japan Tax Consultant Office | Income Tax, Corporate Tax, VAT Back | Open Kitchen Tax Credit at Renovation: Decrease Income Tax for Child Care Assistance

For example, if you spend 500,000 yen on a face-to-face kitchen, your income tax will be reduced by approximately 30,000 yen, considering that you will reduce the taxable portion by 20%. You can make your remodeling more affordable by considering tax reductions based on this type of remodeling work.

Thank you for reading to the end.

You may also be interested in these articles.