Understanding Japanese taxes
Income tax, resident tax, the year-end adjustment, and the deductions most people leave on the table.
- Tell the difference between income tax and resident tax
- Understand when you must file a return yourself
- Use common deductions like furusato nozei and medical costs
- 1
Two taxes on your income
Lesson 1 · 6 minIncome tax (所得税) is national and progressive — higher income is taxed at higher rates. It is withheld from salaries and reconciled at year end.
Resident tax (住民税) is local, roughly a flat 10% of taxable income, and — crucially — billed on the previous year’s income starting the following June. New arrivals often pay little in year one and much more in year two.
Both are calculated on your income after deductions, not on your gross pay. That is why deductions matter so much.
Key takeaways- Income tax is national and progressive
- Resident tax is ~10% and lags one year
- Both are charged on income after deductions
Quick self-check: Why can your tax bill jump in your second year?
Resident tax is billed on the prior year’s income from the following June, so a first low-income year is followed by a larger resident-tax bill.
- 2
Year-end adjustment vs filing a return
Lesson 2 · 5 minMost employees never file a tax return. Their employer runs a year-end adjustment (年末調整) that reconciles withheld tax against the year’s deductions.
You generally must file your own return (確定申告), due by mid-March, if you are a freelancer, have side income above the threshold, have two employers, or want deductions the year-end adjustment cannot handle.
Filing is done online via e-Tax or on paper. Keep your 源泉徴収票 and receipts — they are the raw material for both the adjustment and any return.
Key takeaways- Employees are usually settled by year-end adjustment
- File your own return if freelance or with side income
- The deadline is mid-March; e-Tax makes it online
- 3
Deductions people forget
Lesson 3 · 6 minFurusato nozei (ふるさと納税) lets you redirect part of your resident tax to regions of your choice and receive local gifts, for a flat ¥2,000 out-of-pocket. It needs either the simplified one-stop scheme or a tax return.
The medical expense deduction (医療費控除) applies when household medical costs exceed a threshold in a year. Insurance premiums, some housing loans, and dependents also generate deductions.
These are not loopholes — they are the system working as designed. Learning two or three that fit your life is often the highest-return hour in personal finance.
Key takeaways- Furusato nozei redirects resident tax for ¥2,000 net
- Medical costs above a threshold are deductible
- Learn two or three deductions that fit your life