How to Calculate Depreciation for Minpaku Rentals: Useful Life by Asset Type and Tax-Saving Tips

Used correctly, minpaku depreciation can deliver real, meaningful tax savings

Depreciation is one of the most overlooked tools for improving profitability in minpaku (short-term rental) operations. Buildings, furniture, and equipment each have their own legally defined useful life, allowing you to spread out the acquisition cost as a deductible expense over several years. Done properly, this can reduce your taxable income by hundreds of thousands of yen a year, depending on the size and structure of the property. That said, the actual amount you can save depends heavily on the acquisition price, building structure, business-use ratio, and how it interacts with your other income. Drawing on hands-on experience from the field, this article walks through how to structure depreciation for a minpaku business.

Useful life for buildings, and the minpaku-specific “business-use ratio” issue

The legal useful life of a building is set out in the National Tax Agency’s “Ministerial Ordinance on Useful Life of Depreciable Assets.” As a general rule, wood or synthetic resin structures are depreciated over 22 years, wood-frame mortar structures over 20 years, and steel-reinforced concrete (SRC) or reinforced concrete (RC) structures over 47 years. These figures apply when the asset is put into service for your own business from new. If you acquire a used property, a simplified calculation method applies instead (a remaining useful life based on the number of years already elapsed).

One thing minpaku operators need to watch closely is the “business-use ratio.” If you’re operating under a notification filed under the Private Lodging Business Act (Japan’s “minpaku law”), you’re capped at 180 days of guest stays per year. If the same building is also used as a residence, you can only claim as a business expense the portion corresponding to the days and floor area actually used for guest accommodation. A property used exclusively for minpaku can be claimed at 100%, but if you’re using part of your own home, you’ll need to apportion the costs. This ratio is one of the points tax auditors scrutinize most closely, so it’s essential to keep records that clearly document a reasonable basis for your calculation.

Useful life reference table: furniture, appliances, and equipment

Furniture and equipment installed in a minpaku property are depreciated separately from the building itself. Based on the National Tax Agency’s useful life tables, the main categories are as follows.

Asset Type	Legal Useful Life	Notes
Furniture (beds, tables, etc.)	8 years	Generally 8 years for both wood and metal items
Air conditioners (residential)	6 years	When classified as fixtures/equipment rather than building attachments
TVs, refrigerators, washing machines	5–6 years	Classification varies by type and use
Water heating systems (building attachments)	15 years	May vary depending on electric or gas type
Intercoms, security cameras	8–10 years	Treatment differs depending on whether classified as fixtures or building attachments

As a general rule, low-value assets under ¥100,000 can be expensed in full in the year of acquisition. For assets between ¥100,000 and ¥200,000, you can choose to depreciate them evenly over three years as “lump-sum depreciable assets.” (Small business owners filing blue-form returns who qualify for the special provision on small depreciable assets under the Act on Special Measures Concerning Taxation may be able to immediately expense assets up to ¥300,000. However, there are caps and eligibility requirements, so we recommend confirming the details with a tax accountant.)

A real-world case: when start-up costs and equipment costs get mixed together

Here’s a situation we actually encountered on a property Stay Buddy took over as management partner. Before opening, the owner had made a lump-sum purchase covering an initial bulk order of linens and detergent, furniture, a Wi-Fi router, and the installation of fire safety equipment — all bundled together. The owner assumed “it’s all just start-up costs, so it can all go in one bucket,” but each of these actually requires different accounting treatment. Consumables (linens, detergent) can be fully expensed as supply costs; furniture and the Wi-Fi router need to be capitalized and depreciated as assets; and the fire safety equipment needed to be depreciated separately as a building attachment.

In particular, the cost of installing automatic fire alarms and emergency exit lighting required under the Fire Service Act can add up to a substantial sum (depending on the size and structure of the property, sometimes reaching several hundred thousand yen), and lumping this in as a one-time expense creates real tax risk. If you’re making a batch of purchases and installations around the time you open, sorting your receipts by category as you go will make your tax filing much smoother down the line.

Straight-line vs. declining-balance method: which should you choose for minpaku?

If you’re operating as a sole proprietor, tax law requires that buildings be depreciated using the straight-line method only (Article 120-2 of the Order for Enforcement of the Income Tax Act). Fixtures and equipment, on the other hand, can be depreciated using the declining-balance method if you file the appropriate notification. Because the declining-balance method front-loads larger depreciation amounts in the early years, it can offer stronger tax savings if you expect your business to become profitable within the first few years of opening. If you operate as a corporation, buildings may also be eligible for the declining-balance method in some cases — a point worth considering when weighing whether to incorporate.

How depreciation translates directly into tax savings for minpaku

Income tax is levied on real estate income (or business income) after deducting various expenses from your minpaku rental revenue. Depreciation is a “paper expense” that doesn’t involve any actual cash outflow, which is precisely what makes it so powerful — it lowers your taxable income without touching your cash on hand. For example, if a building’s acquisition cost is ¥30 million (RC structure, 47-year useful life, straight-line method), the annual depreciation expense comes to roughly ¥630,000 (this will vary depending on residual value ratio and acquisition timing). If you can claim that ¥630,000 as an expense every year, someone in the 20% income tax bracket could expect to save roughly ¥120,000–¥130,000 a year in tax.

That said, whether a depreciation-driven loss on your real estate income can be offset against other income, such as salary income, depends on the circumstances — this treatment can differ depending on whether your minpaku operation qualifies as being conducted “on a business scale” and whether you hold a license under the Hotel Business Act. Be sure to confirm this determination with a tax accountant.

Bring your minpaku questions to Stay Buddy Co., Ltd. first

Stay Buddy is a hands-on team specializing in minpaku and hotel business (ryokan-gyo) management. When it comes to sorting out depreciation or categorizing start-up costs, we work alongside tax accountants for the parts that require formal tax judgment, while helping you organize everything from an operational, on-the-ground perspective. Whether you’re not sure which costs should be capitalized as assets, or you’re weighing whether incorporating makes sense for you, we’re happy to talk it through in the context of real-world operations.

How you should structure your depreciation depends on your property’s size, structure, and operating format — whether you’re operating under a Private Lodging Business Act notification or a Hotel Business Act license. If you’d like guidance tailored specifically to your property rather than general advice, start with a free consultation — we’d love to hear from you.

We provide end-to-end support for your minpaku operation, from license application procedures and cleaning/check-in operations to pricing strategy. If you’re already running a property and want to improve its performance, we’ll listen to your current situation first and then offer concrete proposals.

You can reach us via our web form or by phone. Your first consultation is completely free. We look forward to hearing from you at Stay Buddy.