Tax Deductions, Tax Refunds

References: https://argentumwealth.com/tax-deductions-in-japan-here-is-how-to-save-money/

SUMMARY: Tax Deduction, Tax Refunds

1. Home Loan: 1% of remaining home loan
2. Employee Expenses: 55 m.e. or gross employment income (??)
3. Spousal TD (if spouse income < 103 m.e.): 38 m.e.
4. Charitable Contributions: (donation – 2000 JPY)*0.4
5. Life Insurance / Private Pension Premiums: 4 m.e. (national tax = SZ?) + 2.8 m.e. (local inhabitant tax = JZ?)
+ additional 4 m.e + 2.8 m.e. if:
> an individual pension plan, or
> nursing insurance
– 5 m.e. : earthquake insurance
6. Real Estate Investments: depreciation cost, management & maintenance expenses, insurances, and interest payments on a loan
7. Entertainment Expenses (company, expense < 0.5 me per outing)
8. Capital Losses: can be offset against dividends , can be carried over for three years
9. Bereavement and Disasters: will not be taxable

Honorable Mention:
Hometown tax / Furusato Nozei
– not exactly a tax deduction
– pre-pay your taxes & receive gifts in return (up to 30% of the amount of tax paid)

MORE IN DETAILS

Reduce tax bill
a.ka. Tax Deduction (TD)
1. Home Loan TD
– 1% of the remaining home loan
> up to home loan value 40M JPY = 4000 m.e.
> up to 10 years
> 2000++ me home loan –> 20++ me tax deduction
> restriction:
— larger than 50m2
— cannot be a certain age
— primary residence (not holiday home or investment property)
— taxable income < 30M JPY = 3000 m.e.

2. Employee Expenses
a.k.a. Earned income deduction (?)
– minimum standard deduction
> gross employment income, or
> 55 me
> whichever is lower
– currently deduction capped at: 195 m.e.

3. Spousal TD
a.k.a. Spousal Tax Break (TB) laws
– the main earner / primary earner pays less in taxes
IF dependent spouse: making 103 m.e. or less each year
> qualified for Spousal TD

If qualified for Spousal TD
> taxable annual income of the household’s primary earner
is reduced by 38 m.e.

4. Charitable Contributions
– charity organization is in japan
– the charitable organization needs to be qualified
– tax reduction/deduction = (donation – 2000 JPY)*0.4

5. Life Insurance Premiums
– life insurance premium, or
– private pension premiums
> to a Japanese agency in local currency

– maximum deductible amount:
national tax deduction 4 m.e.
local inhabitant tax deduction 2.8 m.e.

+ additional
national tax deduction 4 m.e.
local inhabitant tax deduction 2.8 me
if the premiums are paid under
> an individual pension plan, or
> nursing insurance

– 5 m.e. : earthquake insurance

6. Real Estate Investments
If hold property investments in Japan
– depreciation cost deduction
– management & maintenance expenses, insurances, and interest payments on a loan deduction

7. Entertainment Expenses
– entertainment expenses deduction
> for eating and drinking
> as long as this expense does not exceed JPY 5,000 per outing

8. Capital Losses
– From 1st January 2016
– capital losses* can be offset against dividends
*from the sale of publicly traded shares and some bonds via a Japanese broker .
– these capital losses can be carried over for three years

9. Bereavement and Disasters
Condolence payments, funeral contributions, and disaster compensation will not be taxable. Although this varies depending on the tax office, these contributions are eligible for tax deductions in Japan.

Others:
1. Start-up Expenses
2. Net Operating Losses
3. Payment To Foreign Affiliates
4. Dependents
If you support anyone financially, you are eligible for a tax deduction
> general dependents tax deduction: 38 m.e.
– A dependent is a relative or spouse who depends on the taxpayer
– You don’t have to live in the same house
– If your dependent is a person with special disabilities or is under the age of 23, the deduction applies as long as their annual income does not exceed JPY 48 m.e.

Honorable Mention:
Hometown tax
Furusato Nozei
– not exactly a tax deduction
– to encourage taxpayers to prepay their taxes* to municipalities, rather than to where they live
*annual income and residential taxes
SZ + JZ

> to shift much-needed funds from wealthy cities like Tokyo and Osaka, to cash-strapped regions
– these local regions offer a “gift” in return
> may have a monetary value of up to 30% of the amount of tax paid. Basically:
– pre-pay your taxes & receive gifts in return.

Keywords:
– tax deduction
– tax refunds –> result of tax deduction?