Mortgage interest vs mortgage tax credit
Rental interest deduction vs owner-occupier tax credit, principal, and mixed-use property.
For an owner-occupied home you use the housing-loan tax credit (a credit against tax); for a rental property you deduct the loan interest as an expense — but loan principal is never deductible in either case, and a mixed-use property must be split.
Effective: 2026-01-01 to 2026-12-31
Professional review pending — treat as draft and confirm with the authorities.
Key points
- Owner-occupied home → housing-loan tax credit (reduces tax).
- Rental property → loan interest is a deductible expense.
- Loan principal is never deductible in either case.
- A mixed-use (part-home, part-rental) property must be allocated.
Two different mechanisms
These are not the same thing. The housing-loan tax credit is a credit that reduces your income tax by a percentage of the year-end loan balance on a qualifying owner-occupied home. Rental-property interest, by contrast, is an ordinary business/real-estate expense that reduces rental income. You cannot use the owner-occupier credit on a purely rented property.
Principal and mixed use
In both cases, loan principal repayment is never deductible — only interest (for rentals) or the credit (for owner-occupied). If a property is partly your home and partly rented, allocate the interest and the credit to the correct portions. Getting the split right matters for both your rental expense and your credit eligibility.
Who this is for
- Owner-occupiers with a mortgage
- Landlords with financed property
What this is not
- Cash buyers
- Principal is never deductible; do not confuse the owner-occupier credit with a rental expense.
Frequently asked questions
Do I need to file a tax return in Japan?
Many employees do not, because tax is settled by year-end adjustment (年末調整). You generally must file (確定申告) if you have side income over ¥200,000, two or more employers, self-employment income, sizeable investment or crypto gains, or you want to claim deductions like large medical costs or a first-year mortgage credit. Filing season is Feb 16 – Mar 15 via e-Tax. When unsure, check the NTA guidance or ask a 税理士.