Deductions and legal ways to reduce income tax, including the loss-offset rule for sole proprietors

A sole proprietor operating at a loss can recover part of the income tax already withheld from a main-job salary through 損益通算 (loss offsetting), but this only works legally if the business income is classified as 事業所得 ("business income," implying regularity, a plan, and clients) rather than 雑所得 ("miscellaneous income"). If the additional income is under 3 million yen, the tax office tends by default to classify it as 雑所得, in which case the offset against salary income does not apply. Losses can be carried forward (繰越損失) for up to 3 years, but excessive use of this mechanism draws tax office suspicion. A special deduction of about 250,000 yen exists for working students (勤労学生控除); the figure was mentioned in the chat without full certainty and may differ from current official values, so it is worth rechecking. Beyond the dependent allowance, several other legal ways exist to reduce 所得税: furusato nozei (hometown tax donations); NISA investment deductions (an investment limit up to 4 million yen was mentioned); iDeCo; the mortgage interest deduction; medical expense deductions (for expenses from 100,000 yen a year); and the dependent deduction (扶養控除) — transferring over 380,000 yen a year to a relative recognized as a dependent (people over 15 years old count) reduces income tax, though in practice it is hard to gather enough dependents for a significant effect. Source: https://biz.moneyforward.com/tax_return/basic/55856/ — Breakdown of classifying income as jigyo shotoku or zatsu shotoku and the conditions for offsetting losses..