Whether you're a first-year employee or a seasoned veteran working in Japan, there are several tax deductions and benefits that can help reduce your tax burden each year. From supporting dependents to investing in retirement — here are the most essential tax-saving systems available to salaried workers (aka "salarymen") in Japan.
1. Dependent Deduction (承養控除)
What It Is: A deduction from your taxable income if you're financially supporting family members.
Amount:
- Standard: ¥380,000
- For elderly dependents (age 70+): Up to ¥630,000
Eligibility:
- The dependent must earn less than ¥480,000 annually (or ¥1,030,000 for salary-based income)
- You must share a household or send regular remittances (overseas dependents can qualify)
- Recently, tax offices have tightened scrutiny on this, and questionable claims may affect future visa applications
2. iDeCo (Individual-type Defined Contribution Pension)
What It Is: A personal pension plan where contributions are 100% tax-deductible.
Contribution Limits: Up to ¥23,000/month for company employees.
Features:
- Long-term savings (withdrawal not allowed before age 60)
- Investment options include time deposits, insurance products, and mutual funds
- Why It Helps: Reduces taxable income while preparing for retirement
3. Mortgage Tax Deduction
What It Is: A tax deduction based on your remaining mortgage balance (0.7%) if you purchase a home to live in.
Duration: Typically 10 years, or up to 13 years for qualifying conditions.
Requirements:
- Primary residence only (not for rentals or investments)
- Property must be at least 50m² (or 40m² under special cases)
- Annual income must be under ¥20 million
- You must file a final return the first year; after that, it can be handled in year-end tax adjustment
4. Furusato Nozei (Hometown Tax Donation)
What It Is: Donate to local municipalities and receive tax deductions plus regional gifts (like wagyu beef or fruits).
Tax Benefit: Your income and resident taxes are reduced (actual out-of-pocket cost: just ¥2,000).
How To Use:
- Make donations before year-end
- Apply for the "One-Stop Exception" or file a final tax return
5. Medical Expense Deduction (医療費控除)
What It Is: If your household's total medical expenses exceed a certain amount in a year, you can deduct the excess.
Formula: Total medical expenses − (whichever is higher: ¥100,000 or 5% of income) = deductible amount
Notes:
- You can combine expenses for all family members
- Receipts or official summaries must be kept
6. Social Insurance Premium Deduction (社会保険料控除)
What It Is: All premiums for health insurance, pension, and unemployment insurance are fully deductible.
Handled Automatically: For most company employees, this is reflected in year-end tax adjustment.
Manual Filing Needed: If you pay National Health Insurance or pension individually, you must report it yourself.
💡 Summary Table: What to Prioritize
| Category | Recommendation |
|---|---|
| Dependent Deduction | 👍 Highly recommended if eligible |
| iDeCo | 👍 Good long-term savings benefit |
| Mortgage Deduction | 👍 Worth it for homeowners |
| Furusato Nozei | 👍 Easy, popular, and rewarding |
| Medical Deduction | ⚪ Only if you have high expenses |
| Social Insurance | ✅ Automatically applied by employer |