Japan Income Tax and Resident Tax — From Withholding to Tax Returns

How income tax is calculated

The reconstruction special income tax is 2.1% of income tax and applies through 2037. Under the FY2026 tax reform, a new 1% defence special income tax starts from 2027 income while the reconstruction tax falls to 1.1% (extended to 2047), keeping the combined 2.1% unchanged.

All social insurance premiums you pay are deductible. So with the same salary, higher premiums mean lower taxable income.

Annual salary − employment income deduction = employment income Employment income − deductions (social insurance, basic, dependents, etc.) = taxable income (rounded down to ¥1,000) Taxable income × rate − subtraction amount = income tax Income tax × 102.1% = income tax + reconstruction special income tax (amount payable)

Employment income deduction and basic deduction for 2026

Deductions rose sharply in both 2025 and 2026. The figures below apply to 2026 income (January–December 2026).

• Basic deduction (income tax): ¥1.04 million for total income up to ¥4.89 million, ¥670,000 for ¥4.89–6.55 million, ¥620,000 for ¥6.55–23.5 million. The permanent amount rose from ¥580,000 to ¥620,000, with a special addition for low and middle incomes in 2026 and 2027. Above ¥23.5 million it tapers to zero over ¥25 million.
• The ¥1.78 million threshold: Minimum employment income deduction ¥740,000 + basic deduction ¥1.04 million = ¥1.78 million. Someone with only salary income pays no income tax up to ¥1.78 million a year (¥1.03 million until 2024, ¥1.6 million for 2025).
• Resident tax is separate: The resident tax basic deduction is ¥430,000, and the ¥740,000 minimum employment deduction applies from FY2027 resident tax (on 2026 income). So you can owe resident tax even with zero income tax.

Income tax rates and a worked example

The same person’s resident tax (FY2027) uses a ¥430,000 basic deduction: taxable ¥2.41 million × 10% − ¥2,500 adjustment credit + ¥5,000 per-capita levy = about ¥244,000. It is common for Japanese employees to pay more resident tax than income tax.

Example: 2026, salary ¥5 million, single, social insurance about ¥720,000 (assumed) Employment income 5m − (5m × 20% + 440,000) = ¥3.56 million Taxable income 3.56m − 720,000 − basic 1.04m = ¥1.8 million Income tax 1.8m × 5% = ¥90,000 → ¥91,890 with reconstruction tax

Withholding and year-end adjustment

• Withholding (gensen choshu): Your employer deducts income tax from each paycheck using the official withholding tables. Dependents are reflected through the declaration for dependents (fuyo kojo-to shinkokusho) submitted at the start of the year.
• Year-end adjustment (nenmatsu chosei): In December (or the last pay of the year) the employer recalculates the full year’s tax, refunding any overpayment or collecting a shortfall. Life and earthquake insurance deductions, spouse deductions, iDeCo contributions and the housing loan credit from the second year onward are handled here.
• Settling the 2026 changes: Withholding for January–November 2026 used the pre-reform tables, and the effect of the larger deductions is reflected all at once in the 2026 year-end adjustment (per National Tax Agency guidance; timing may vary by employer — please confirm).
• Withholding slip (gensen choshu-hyo): The document showing the year-end adjustment result, issued by the end of January. It lists salary, deductions and tax, and is used for loan applications, tax returns and visa renewals. If you leave a job you receive it within a month.

When you need to file a tax return

Employees are normally done after the year-end adjustment, but in the cases below you file a final tax return (kakutei shinkoku) between 16 February and 15 March of the following year. A refund-only return can be filed any time within five years from January of the following year.

You can prepare the return on the National Tax Agency’s online form and submit via e-Tax. With a My Number Card, data such as withholding slips, medical expense notices and furusato nozei records can be partly imported automatically through Mynaportal.

• Salary over ¥20 million: Not covered by year-end adjustment, so a return is required.
• Side income over ¥200,000: If income from side work (revenue minus expenses) exceeds ¥200,000 a year you must file. Even below that, you must still report it for resident tax.
• Medical expense deduction: If household medical costs (net of insurance reimbursements) exceed ¥100,000 a year (or 5% of income if income is under ¥2 million), the excess is deductible up to ¥2 million. You choose this or the self-medication tax scheme, not both.
• First year of the housing loan credit: The first year requires a return; from the second year it can be handled through year-end adjustment.
• Furusato nozei (hometown tax donations): With five or fewer recipients and no other reason to file, the one-stop exception (application by 10 January) applies the deduction to resident tax without a return. With six or more, or if you file anyway (e.g. for medical expenses), list all donations on the return, since the one-stop applications become void.
• Left a job mid-year and did not rejoin: You missed the year-end adjustment, so filing often refunds part of the tax withheld.

Resident tax: based on last year’s income

• How it works: Resident tax (juminzei) is levied by the municipality where you live on 1 January, on the previous year’s income. The income levy is 10% of taxable income (4% prefectural + 6% municipal), plus a per-capita levy of ¥4,000 a year (¥1,000 prefectural + ¥3,000 municipal; some municipalities add more). The national forest environment tax of ¥1,000 is collected with it, so the fixed part comes to about ¥5,000 a year.
• Special collection: For employees it is deducted from pay in 12 instalments from June to the following May. So a pay rise only raises your resident tax from the following June.
• Ordinary collection: The self-employed and retirees pay by bill, usually in four instalments in June, August, October and January.
• First-year workers: In your first year there is no prior-year income, so no resident tax; it starts in June of your second year. This is why take-home pay seems to drop in year two.
• When you leave a job: If you leave between January and May, the remaining resident tax is normally deducted from your last pay in one lump. If you leave between June and December, you choose lump-sum deduction or ordinary collection.

Leaving Japan

When you leave Japan and become a non-resident, settle your taxes in advance.

• Income tax: Your employer performs the year-end adjustment before you leave. If you need a return (for side income, etc.), file before departure, or appoint a tax agent (nozei kanrinin), notify the tax office, and have them file and pay for you.
• Resident tax: If you lived in Japan on 1 January, you owe that year’s resident tax (on the previous year’s income) even after leaving. Pay it in full before departure or register a tax agent with the municipality.
• Payments after departure: Salary or retirement allowance from Japan received after leaving may be taxed as non-resident income (generally 20.42% withholding). Check the tax rules and tax treaty of your new country of residence too.

FAQ

Basis and sources

• National Tax Agency No.1410 — Employment income deduction
• National Tax Agency No.1199 — Basic deduction (including the 2026–2027 special addition)
• National Tax Agency No.2260 — Income tax rates
• Ministry of Finance — FY2026 tax reform (basic deduction, employment income deduction, defence special income tax)
• National Tax Agency No.1900 — Salaried workers who must file a tax return
• National Tax Agency No.1120 — Medical expense deduction
• Ministry of Internal Affairs and Communications — Individual resident tax
• Ministry of Internal Affairs and Communications — How furusato nozei works (one-stop exception)
• National Tax Agency e-Tax (online filing and payment)

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