This is a translation of the Japanese original. The Japanese version is authoritative; figures follow Japanese tax law.
For people who hold down a company job while looking after the rice paddies and fields they inherited from their parents, the tax return is an annual headache. A return is required once farm income exceeds 200,000 yen, and if the farm runs at a loss you can use offsetting losses against other income (loss aggregation) to get back income tax withheld from your salary. However, if you keep no books and revenue is 3 million yen or less, the income is treated as "miscellaneous income" rather than "business income", and the loss cannot be set against your salary. The rice and vegetables you eat yourself also count as revenue; income is recorded in the year of harvest rather than the year of sale; and shipments through JA need no invoice. This article sorts out the rules unique to agricultural income, using the National Tax Agency's guides for the agricultural income forms.
Conclusion: whether you must file turns on "200,000 yen", whether you can offset a loss turns on "books"
| Farm situation | Tax return | Offsetting against salary |
|---|---|---|
| Farm income (revenue minus expenses) is positive and over 200,000 yen | Required | — (a profit, so nothing to offset) |
| Farm income is positive and 200,000 yen or less | No income tax return needed. A resident tax return is still required | — |
| Farm income is a loss. You keep books and run it as a business | Not compulsory, but filing brings a refund | Possible (business income loss) |
| Farm income is a loss. No books, revenue 3 million yen or less | Not needed | Not possible (loss on miscellaneous income from side work) |
For a part-time farmer (salaried worker who also farms), the crux is the difference between the third and fourth rows. With the same loss, whether or not you keep books decides whether tens of thousands of yen come back to you.
The 200,000 yen test looks at "income", not "revenue"
A salaried employee must file a tax return once income other than salary exceeds 200,000 yen for the year[NTA No.1900]. "Income" here means what is left after deducting necessary expenses from farm produce sales, not the sales figure itself. Even if you ship 600,000 yen worth of rice, if fertiliser, agricultural chemicals, depreciation on machinery, fuel and so on come to 450,000 yen, income is 150,000 yen and no income tax return is required.
Even at 200,000 yen or less, however, there is no equivalent exemption for resident tax, so a resident tax return to your municipality is required. Failing to file puts you at a disadvantage in things like the reduction test for National Health Insurance premiums. For details, see resident tax returns for people who do not file an income tax return.
Whether a loss can offset salary depends on "business income" versus "miscellaneous income"
Only losses on real estate income, business income, timber income and capital gains can be aggregated; a loss on miscellaneous income cannot be deducted from other income[NTA No.2250]. If your farm income is business income, you can set the loss against employment income and get an income tax refund; if it is miscellaneous income, the loss is simply forfeited.
The 2022 (Reiwa 4) revision of the Basic Income Tax Directives put the line between business income and "miscellaneous income from side work" in writing. The key point is whether you retain books and records: if you do, the income is in principle business income; if you do not, it is in principle miscellaneous income. Even with books, though, the activity may not be recognised as a business where revenue is routinely 3 million yen or less and under 10% of your main income (salary), or where losses continue with no prospect of being resolved.
An employee with a salary of 5 million yen. Farm revenue 800,000 yen, expenses 1.1 million yen, a loss of 300,000 yen (books kept, business income)
Income after offsetting: employment income 3.56 million yen minus 300,000 yen = 3.26 million yen
Tax saved: 300,000 yen x income tax 10% = a refund of 30,000 yen, and next year's resident tax also falls by 300,000 yen x 10% = 30,000 yen
With the same loss judged to be miscellaneous income, both the refund and the reduction are zero.
What you want on hand to show that you "run it as a business" is records of harvest volumes and shipments, receipts for expenses, and efforts to improve planting and sales channels. Even in a year of losses, writing down what you changed for the following year gives the tax office something to go on. For how to keep books and the requirements for blue return filing, see the difference between blue and white tax returns.
The forms you use are the "agricultural income" versions, which differ from the general ones
With a white return you use the "statement of income and expenses (agricultural income form)"; with a blue return, the "blue return financial statements (agricultural income form)". The National Tax Agency publishes filling-in guides for the Reiwa 7 (2025) tax year[NTA: filling in the statement of income and expenses (agricultural income form)][Filling in the blue return financial statements (agricultural income form)]. The differences from the general forms are that revenue is entered by crop (rice, vegetables, fruit trees and so on) and that the expense lines include farming-specific items such as seeds and seedlings, fertiliser, agricultural chemicals and sanitation, farm tools, work clothing, and agricultural mutual aid premiums.
| Item | Rule specific to agricultural income |
|---|---|
| When revenue is recorded | Recorded in the year of harvest, at the value at the time of harvest (harvest basis, Article 41 of the Income Tax Act). Rice still in the barn at year end is revenue for that year |
| Own consumption | What you and your family eat also counts as revenue. If the books record an amount at or above cost, roughly 70% or more of market value is accepted (Directive 39-2)[NTA Directive 39-2] |
| Gifts to relatives | Treated the same as own consumption. What you hand over free of charge is also revenue |
| Subsidies and mutual aid payments | Subsidies under the Management Income Stabilisation Program, and payments from income insurance or agricultural mutual aid, are recorded as farm revenue |
| Farm machinery | Items of 100,000 yen or more are depreciated. Farm machinery such as tractors and combine harvesters has a useful life of 7 years. With a blue return, items under 400,000 yen can be expensed in full |
| Light truck, electricity, water | Anything shared with the household is apportioned by actual use, and only the farming share is expensed |
| Farmers' Pension contributions | Fully deductible as social insurance premiums. Agricultural mutual aid premiums are an expense |
For how depreciation works, see the basics of depreciation; for expensing items under 400,000 yen in full, see the special rule for low-value depreciable assets.
Consumption tax and invoices: no invoice needed for consignment shipments to JA
If farm sales are 10 million yen or less a year, you can remain a tax-exempt business for consumption tax, and most part-time farmers are in that bracket. On invoices there is the "JA (agricultural cooperative) exception under the invoice system": for farm, forestry and fishery products consigned for sale to a cooperative under unconditional consignment and pooled settlement, the producer is released from the obligation to issue an invoice. Because the buyer can claim the purchase tax credit using the documents JA issues, the producer does not need to become a registered business.
Conversely, when you sell at a farm stand or deliver directly to restaurants, buyers may ask you for an invoice. If you stay tax-exempt, the buyer can only credit a set proportion of the purchase tax under the transitional measures (70% from October 2026; the FY2026 reform eased this from the originally planned 50%), and this can be used as leverage in price negotiations. For the basics of invoices see the invoice system and tax-exempt businesses, and for the narrowing of the transitional measures see the 70% credit under the invoice transitional measures.
Is a blue return worth it?
A blue return suits you if
- You turn a profit every year and can use the 650,000 yen special deduction (with electronic filing)
- You have loss-making years (losses can be carried forward for three years)
- You want family members to help and to pay them as full-time employees
A white return is fine if
- Income is around 200,000 yen every year and you cannot use up the deduction
- Double-entry bookkeeping is a burden you will not keep up
A blue return requires advance approval: to use it from the 2027 tax year, apply by March 15, 2027. Even with a white return you must keep books and receipts, and as long as you have them, the case for "business income" stands.
What to do today
- Add up this year's farm revenue and expenses and see whether income exceeds 200,000 yen or is a loss. Include own consumption and gifts in revenue.
- If you have no books, bundle shipping slips and receipts by month and make a cash book. This is the dividing line between "business income" and "miscellaneous income".
- If you sell anywhere other than JA, check whether you have been asked for an invoice. If not, staying tax-exempt is fine.
Frequently asked questions
The paddy is in my parent's name and the money goes into my parent's account. Am I the one who files?
Farm income belongs to whoever actually runs the operation: the person who decides the planting, bears the expenses and receives the revenue. If your parent is the one running it and receiving the money, your parent is the one who files. This is judged on the substance, not just whose name is on the land.
Summary
- Salaried workers must file a tax return if their farming income (revenue minus expenses) exceeds 200,000 yen. Even at 200,000 yen or below, a resident tax return is still required.
- Only business income losses can be offset against salary income. Without bookkeeping and with revenue of 3 million yen or less, the income is classified as miscellaneous and cannot be offset.
- Produce consumed by yourself or your family, or given as gifts to relatives, also counts as income. It is recorded in the year of harvest, not the year of sale.
- If shipments go through unconditional consignment to JA (agricultural co-op) under the joint settlement system, issuing an invoice is not required.
- Bundling shipment slips and receipts by month to keep a cash ledger is what separates business income from miscellaneous income.
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References (sources)
This article is based on the materials below. Rules are revised, so please check the latest content before you file.
Note: this article provides general information and is not tax advice. The line between business income and miscellaneous income is judged on individual circumstances. If you are unsure, please check with a tax office, a tax accountant, or the tax consultation service at JA.