Tax-Saving Systems Every Salaryman in Japan Should Know

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