Introduction

Working parents send their children to daycare and pay daycare fees so they can work.

Childcare fees are an essential expense in the course of working, and should be considered an "expense."

However, in Japan today, childcare fees cannot be claimed as an expense when filing a tax return.

This is not because the law says that childcare fees cannot be counted as an expense. It is because the tax office has interpreted and applied the matter in a way that means childcare fees are not recognized as an expense.

Even if putting your child in daycare is essential to continuing to work, it is considered a personal expense.
If the amount of expenses that cannot be recognized increases, the amount of deductions will decrease and the amount of tax to be paid will increase. This places a heavy burden on working parents who are also business owners.

Summary of the lawsuit

The plaintiffs are Mr. Kuramochi (male) and Ms. Matsumura (female).

At the time of filing the lawsuit (February 25, 2025), Kuramochi has two children, ages 3 and 1, and her eldest son attends a licensed daycare center.

At the time of filing the lawsuit (February 25, 2025), Matsumura had two children, aged 4 and 1, and her eldest daughter and son attended a licensed nursery school.

Kuramochi and Matsumura initially filed their tax returns for the 2023 fiscal year without including the childcare fees in their necessary expenses, and then filed a tax return for correction, arguing that the childcare fees were expenses and therefore should be taxed less. The tax office, following traditional tax practice, rejected the claim, stating that the childcare fees were not necessary expenses, without providing detailed reasons, on the grounds that 1) they were household expenses and 2) they were not expenses necessary for business.
They are calling on the government to revoke the tax office's decision, claiming that it is illegal.

Issues at issue

Are childcare fees a necessary expense that should be deducted?

Article 37, paragraph 1 of the Income Tax Act allows "the amount of expenses incurred in connection with sales expenses, general administrative expenses, and other operations that generate such income during the year" to be deducted from business income as necessary expenses.
For example, money used to earn income, such as office rent, computers, stationery, transportation, etc., can be recognized as expenses. Tax is levied on the "profit" obtained by subtracting expenses from income, so the more expenses you recognize as expenses, the less tax you will have to pay.

On the other hand, Article 45, Paragraph 1, Item 1 of the Income Tax Law stipulates that "household expenses" are not included in necessary expenses. Household expenses refer to expenses related to personal consumption such as clothing, food, housing, entertainment, and education, and are not considered necessary expenses because they are not necessary for business income.

There is no explicit provision that states that childcare fees are "household expenses," and in current tax practice, they are treated as "household expenses" based on the government's interpretation and application.

Therefore, in this lawsuit, it is argued that childcare fees are necessary for the performance of business that generates business income, and therefore constitute necessary expenses, not household expenses.

Necessary expenses include expenses necessary for the performance of business operations that generate business income, and expenses necessary for the performance of business operations, such as utility bills and communication fees, are recognized as expenses even if they are not directly related to income. Similarly, childcare fees are also expenses necessary for the performance of business operations.

Parents who wish to use a nursery school must be examined by the city or town to see if there is a reason for not using the school, such as "parental work," and must receive certification of the "need for childcare." Therefore, if a parent receives certification that their child needs childcare due to their employment, and uses a nursery school and pays childcare fees, it is clear that the purpose is to use the school for work.

In addition, childcare fees are closely related to work in the sense that they are expenses that cannot be incurred without working. For example, food expenses are unavoidable in leading an individual's consumer lifestyle, but they may also be included in necessary expenses when working as entertainment and social expenses, so it is not possible to make a uniform judgment on whether they are closely related to work.
On the other hand, childcare fees are only paid when the "necessity of childcare" is recognized by the government, in other words, when the use of a childcare center is recognized as "necessary for the performance of business," and are clearly distinguished from other private consumption. Therefore, it is entirely possible to recognize them as necessary expenses.

Social significance

Under the current interpretation and practice of the tax office, childcare fees are not recognized as business expenses, but are considered an expenditure within the household.
However, in today's world where dual-income households are becoming commonplace and self-employed people are being forced to return to work as soon as possible, childcare fees are an essential business expense. Making childcare fees an expense supports working parents, helps combat the declining birthrate, and is an important step toward building a better society.

I believe this is not a matter of personal interests for business owners, but a discussion to create an environment in which society as a whole can better balance work and childcare. If this argument is accepted and the tax system is changed to one that supports the balance between work and childcare, that change will send a clear message that "it is possible to balance work and childcare," and this will be shared throughout society.
In this sense, this case will help create a society in which everyone can work and raise children with peace of mind, regardless of the working style they have. Furthermore, by setting a precedent for correcting unreasonable child-rearing practices, this case will encourage people facing similar challenges to speak out, leading to the further development of a system that supports child-rearing throughout society.

Use of funds

• Litigation costs: Actual costs such as stamp duty and copying fees
• Fee for requesting a letter of opinion from a scholar: We plan to have a tax law expert write the letter of opinion.
• Attorney's fees: I would like to use the funds to cover the costs of the legal team that will carry out the lawsuit.
• Other donations will be used for research expenses (research into foreign legal systems), events and PR expenses.

Plaintiff’s thoughts

Plaintiff Yukihiro Matsumura

Plaintiff: Kuramochi (Abe) Hisashi

Thoughts from the lawyers involved in this lawsuit

Like the plaintiffs, the members of our legal team are self-employed individuals who are devoted to raising their children.
Currently, some of our attorneys continue to work while sending their children to nursery school, putting them in the same position as the parties in this lawsuit. A lawyer's work is diverse, including appearing in court, meeting with clients, and writing documents. I realize every day how difficult it is to balance childcare with these duties.

However, under current tax administration, childcare fees are not recognized as a necessary expense. Childcare fees are classified as a household expense related to raising children, and are not an expense necessary for work. We cannot help but think that the old idea that childcare is a job that only takes place at home is at the root of this. We must reconsider the old value that "childcare is unpaid work that only takes place at home," and ask the court to recognize the obvious fact that childcare fees are a necessary expense, since people have no choice but to leave their children in childcare in order to work.

Not only as representatives in this lawsuit, but also as people in the same position, we will fight with all our might alongside the plaintiffs to change this unreasonable tax administration.

Introduction of the lawyer in charge

Attorney Yoshiyasu Toda (LEDGE Law Office)
Attorney Naoyasu Kawazawa (Waseda Legal Commons Law Office)
Attorney at Law, Hiroki Enatsu (Tokyo Law Office)
Attorney-at-Law, Taiki Taniguchi (Tokyo Public Law Office, Director of LEDGE General Incorporated Association)
Attorney Daisuke Igeta (Miyamura & Igeta Law Office, Secretary General of LEDGE General Incorporated Association)

Why can't childcare fees be considered an expense?
 A campaign is also being held at the same time!

Special website for "Why can't childcare fees be expensed?": https://hoikuryo.ledge.or.jp/

To coincide with the filing of this lawsuit, we will be running various support activities, including setting up a special website and posting on social media, as well as a campaign to support the lawsuit.
The special website will feature many messages of support from supporters, making public opinion visible. Please take a look.

We need your help to change the rules and create a society where everyone can work with enthusiasm and where raising children is a joy rather than a burden. Please make your voice heard in any way you like, whether that be by donating to this lawsuit, attending court hearings, or spreading the word on social media.

Each and every action will have a big impact. Please support us!

About LEDGE

This lawsuit has been filed in support of LEDGE, and all litigation costs and attorneys' fees are being covered by LEDGE.
The defense team's members Toda, Igeta, and Taniguchi are members of LEDGE.

What is LEDGE? We are a group of experts who promote social change, focusing on public litigation. We collect the resources necessary for public litigation from society and provide various support to carry out more substantial and effective public litigation. We also develop campaigns to raise awareness of the issues that public litigation deals with, arouse public opinion, and move the government and politics. We work in cooperation with LEDGE, a law firm with the first lawyer in Japan who is dedicated to public litigation full-time, to support their activities. For more information, please see the link below.