Tax Deductions for Residents in Japan

Japan offers a range of deductions and exemptions that reduce taxable income for individuals. Understanding these can significantly lower your tax burden.

Key Deductions and Exemptions:

• Basic Exemption: ¥480,000 per person for residents. Non-residents generally only get this exemption and very limited others.
• Spousal and Dependent Exemptions: You can claim up to ¥380,000 for a qualifying spouse or dependent, with higher amounts for disabled or elderly dependents. Additional documentation (proof of support and remittance) is required for relatives abroad.
• Insurance Premium Deductions:
  • Life Insurance: Premiums for life insurance are deductible within capped limits.
  • Earthquake Insurance: Premiums for earthquake insurance are also deductible within capped limits.
• Social Security Premiums: Payments into public health insurance, national pension, welfare pension, etc., are 100% deductible from income.
• Medical Expense Deduction: Medical costs paid by you (not covered by insurance) exceeding ¥100,000 (or 5% of your income, whichever is lower) are deductible. A special “self-medication” deduction also exists for certain over-the-counter drug purchases.
• Casualty Loss Deduction: Losses from disasters (earthquakes, typhoons, etc.) or theft may be deductible under certain conditions.
• Donations Deduction: Charitable contributions to designated organizations exceeding ¥2,000 can be deducted, up to 40% of your income.
• Other Personal Exemptions: Additional exemptions exist for disabled persons, widows/single parents, and working students.

Tax Credits:

After calculating your tax, certain credits can directly reduce your tax liability (not just taxable income). Major credits include:

• Foreign Tax Credit: For taxes paid to foreign governments on income also taxable in Japan. Non-permanent residents have limitations on this credit.
• Dividend Credit: For dividends received from Japanese corporations.
• Housing Loan Credit (Home Mortgage Interest Deduction): For qualifying housing loans, this is a significant credit available over several years.
• Credits for political donations, disaster-related housing improvements, etc.

The National Tax Agency (NTA) publishes detailed tables and guides on all available deductions and credits. It's crucial to check the latest information and specific requirements for each deduction or credit.