- September 4, 2026
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Every year, a lot of foreign employees in Japan quietly miss out on tax deductions in Japan they could have claimed—money that would have come straight back to them. It’s easy to see how: you leave the year-end adjustment to your employer, and never realize there were deductions you could have used yourself.
So how do you stop the leak? It starts with two things—knowing which deductions you’re entitled to, and working out whether to claim each one through the year-end adjustment or a tax return. This guide walks you through both. Certified financial planner Masamichi Takayanagi covers it all: checking your residency status, what changed in the 2025 tax reform, the deductions foreign residents miss most often, and how to tell which ones go through the year-end adjustment versus a tax return.
About the Supervisor & Writer
Masamichi Takayanagi
Financial Planner & columnist;
An independent financial planner with extensive experience as a financial columnist, specializing in a wide range of topics including asset management, life insurance, inheritance, loan products, and credit cards. Over 1,000 articles and projects have been contributed to the field.
1st grade Certified Skilled Professional of Financial Planning, Certified Financial Planner®.
Table of Contents
Chapter 1: First, Are You a "Resident" for Tax Purposes?
Here’s the catch with tax deductions in Japan: as a rule, you can only claim them if you count as a resident for tax purposes. Japan’s income tax starts by sorting people into “residents” and “non-residents,” based on where they live and how long they’ve stayed. Residents then get split again—into “non-permanent residents” and everyone else.
So how do you know which you are? You’re a resident if your home base is in Japan, or if you’ve lived here continuously for at least a year. That “home base” (domicile, in tax terms) comes down to where your life actually centers—not just how long you’ve been in the country.
From there, if you don’t hold Japanese nationality and have spent five years or less in Japan over the past decade, you’re a “non-permanent resident.” In that case, you’re taxed on all your income except foreign-source income—though foreign income still counts if it’s paid inside Japan or sent here.
Everyone else in the resident category is taxed on their worldwide income, both Japanese and foreign. Non-residents, by contrast, are taxed only on income that arises in Japan.
Even if you’re working in Japan, your status can go either way depending on things like your contract length and where your life is really based. When in doubt, ask your company’s HR or payroll team, or your local tax office.
Chapter 2: What Changed in the 2025 Tax Reform
The bottom line first: the 2025 reform raised the baseline amounts for deductions, generally in a direction that leaves salaried workers with more take-home pay. The basic deduction went up from ¥480,000 to ¥580,000, and for people below a certain income level, a special measure was added that tops up the deduction depending on how much they earn.
The minimum salary income deduction also rose, from ¥550,000 to ¥650,000. For those with salary income only, the income threshold for the spouse deduction and dependent deduction was raised from ¥1.03 million to ¥1.23 million.
Meanwhile, the salary-income mark below which you personally owe no income tax has been raised to ¥1.6 million, provided you have no other income. For a salaried worker with no dependents, the salary income below which resident tax isn’t charged can be around ¥1.1 million—though this varies by municipality.
A new “special deduction for specified relatives” was also introduced, covering relatives aged 19 to 22—the university-student years—to ease the burden on those supporting them.
For foreign employees on a salary, there are now more situations where simply filling in your year-end adjustment forms carefully is enough to benefit. The figures here are general guides only; the amount that actually applies depends on your income and family, so always confirm against your employer’s guidance or the National Tax Agency. Note, too, that the 2026 tax reform has revised the basic deduction and more from 2026 onward, so check the latest figures for current deduction amounts and tax-free income thresholds.
Source: National Tax Agency, “2025 Revision of the Basic Deduction and Related Changes” / National Tax Agency, “Basic Deduction”
Here we cover the tax deductions that foreign residents, in particular, tend to overlook.
Dependent Deduction and Overseas Dependents
Left family back home and send money to support them? You may be able to claim the dependent deduction for relatives living abroad, too—if you meet certain conditions.
Broadly, an eligible dependent is someone who shares a household budget with you and earns ¥580,000 or less a year. They need to be a blood relative within the sixth degree (other than your spouse) or an in-law within the third degree, and generally aged 16 or older.
For relatives overseas, the rules then depend on their age:
- 16 to under 30, or 70 and over: eligible if they meet the general requirements.
- 30 to under 70: not eligible unless one of these applies—they’re studying abroad, they qualify as a person with a disability, or you’ve paid them ¥380,000 or more that year for living or education costs.
You’ll also need paperwork to claim an overseas relative:
- Documents proving your family relationship
- Documents showing your remittances to them
- A student visa or similar, if the reason is study abroad
- Proof you paid ¥380,000 or more that year, if you’re relying on that condition
One thing people get wrong: your remittance records have to be traceable to each relative you claim. Say you send one lump sum to your mother to cover both parents, and she spends part of it on your father locally. That generally won’t count as proof you supported your father. So send money in a way that records who received how much—through a bank or a money transfer operator—and keep every document.
Source: National Tax Agency, “Dependent Deduction (No. 1180)”
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Social Insurance You Paid for Family
Social insurance premiums count toward your deduction not just for yourself, but for family members you paid for too. The full amount you pay for health insurance, employees’ pension, employment insurance, nursing-care insurance, and the like comes off your taxable income.
If you’re a salaried worker, your own premiums are handled automatically through payroll—but it’s easy to miss the National Pension or National Health Insurance you covered for a family member who shares your household budget. Say you paid your student child’s National Pension premiums on their behalf: you can include what you paid in your own claim.
What counts is strictly the amount you actually paid. Keep your receipts and deduction certificates, and make sure to include everything when you do your year-end adjustment or tax return. It’s a shame to overlook the family portion, so don’t forget to keep a record of what you paid.
Life Insurance and Earthquake Insurance
If you have private life insurance or earthquake insurance, you can reduce your income based on the premiums you pay. The life insurance premium deduction is split into three categories—general life insurance, nursing and medical insurance, and personal pension insurance—and you can deduct within a cap for each.
For 2026 and 2027, if you have a dependent under 23, the cap on the general life insurance deduction for new policies rises from the usual ¥40,000 to ¥60,000. Even so, the overall cap on the life insurance premium deduction—combining the nursing-medical and personal-pension deductions—stays at ¥120,000, as before.
With the earthquake insurance deduction, you can claim up to ¥50,000 against your income tax, depending on the earthquake premiums you paid. To claim either deduction through the year-end adjustment, you’ll generally need a deduction certificate issued by your insurer.
These certificates are usually mailed or issued electronically around autumn, so once yours arrives, hold onto it until your year-end adjustment or tax return. If you lose it, you may have to request a reissue—so it’s reassuring to check early.
Medical Expenses
If your medical costs over the year top a certain amount, you can deduct the excess from your income. As a rough guide, you qualify once the medical expenses you paid—for yourself or for a spouse or other relative who shares your household budget—exceed ¥100,000; for those with total income under ¥2 million, the threshold is 5% of income instead.
The deduction is worked out by taking your medical costs, then subtracting any amount covered by insurance and the threshold, up to a cap of ¥2 million. Medical costs for family members who share your household budget can be combined too, as long as you paid them. Who gets to claim isn’t just about whose income is higher—it comes down to who actually paid the costs.
If your yearly spending on eligible medicines at the drugstore tops ¥12,000, there’s another option: the Self-Medication Tax System. If you meet conditions such as having a health check-up or vaccination, you can deduct the excess up to ¥88,000.
You can’t use this alongside the regular medical expense deduction, so compare the amounts and pick whichever works out better.
Small-Business Mutual Aid and iDeCo Contributions
If you want to build up savings for later while trimming your tax bill, iDeCo is worth a look. Your iDeCo contributions are fully deductible from your income, so you’re growing your assets and saving on tax at the same time.
From December 2026, the contribution limit for iDeCo is being revised for “Category 2 insured persons.” The shared cap—combined with corporate pensions and the like—becomes ¥62,000 a month, though how much you can actually pay into iDeCo depends on things like your employer’s corporate-pension contributions.
The small-business mutual aid plan, meanwhile, is for certain sole proprietors and executives of small businesses. If you’re in regular full-time employment as a company employee, you generally can’t join—even if you have business income from a side job.
If you forget to submit the paperwork, the deduction won’t be applied, so don’t forget to keep your certificate.
Donation Deduction (Furusato Nozei)
Furusato nozei—where you donate to a municipality and receive a thank-you gift in return—is available to foreign residents too, as long as you pay a certain amount of income tax and resident tax. Within your deduction limit, you can receive regional specialties for an effective out-of-pocket cost of just ¥2,000, with most of what you donate coming off your resident tax and income tax.
If you donate to five municipalities or fewer, you can use the One-Stop Exception and skip the tax return entirely. But if you donate to six or more, or file a return for some other reason, you’ll need to list all your donations on that return.
Here’s the easy trap: if you file a tax return for something like a medical expense deduction, your One-Stop Exception is voided. When that happens, the deduction won’t apply unless you write the full amount onto your return yourself.
Your deduction limit changes with your income and family situation, so it’s reassuring to check it using the simulators on the furusato nozei portal sites before you donate.
Home Loan Deduction
If you’ve bought your own home with a mortgage, you can claim a tax credit based on your loan balance. It works by taking your year-end loan balance and subtracting a set percentage directly from your income tax—and because the amounts involved are large, it’s a deduction well worth using.
The key thing to watch: the first year is the one time you have to file a tax return. In the year you buy, you file it yourself; from the second year on, you can keep claiming it through your employer’s year-end adjustment.
To qualify, you’ll need to meet requirements such as a minimum floor area, actually living in the home, and a repayment period above a certain length. And if you forget to file that first year, you can sometimes still make a refund claim—but there’s a time limit, so if you realize you’ve missed it, check with the tax office sooner rather than later.
In the year you buy, start getting ready for your tax return early.
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Foreign Tax Credit
If income you earned overseas is also taxable in Japan, and you’ve already paid a tax equivalent to income tax on it abroad, you may be able to claim the foreign tax credit. It exists to adjust for international double taxation—where the same income is taxed by both Japan and another country.
For foreign residents, though, the range of income taxed in Japan depends on your tax classification. Residents other than non-permanent residents are, as a rule, taxed on all income from home and abroad; non-permanent residents are taxed on foreign-source income to the extent it’s paid within Japan or remitted to Japan.
There’s a cap on how much you can claim through the foreign tax credit. The income tax limit is calculated by multiplying that year’s income tax by the share your adjusted foreign income makes up of your total income—so you can’t necessarily subtract every yen of foreign tax from your Japanese income tax. Some foreign taxes are also outside the credit’s scope, such as tax imposed abroad beyond the rate set by a tax treaty.
To claim the foreign tax credit, you generally file a tax return and attach a “statement concerning the foreign tax credit” along with documents proving the foreign tax was imposed. If you have foreign income or have paid tax abroad, check your own residency classification and the relevant tax treaty—and when it’s hard to judge, it’s best to consult the tax office or a tax accountant.
Chapter4: Two Ways to Claim: Year-End Adjustment or Tax Return
Deductions are claimed back in one of two ways. Some are handled through your year-end adjustment—just submit the forms to your employer. These include the basic and salary income deductions, social insurance and life/earthquake insurance deductions, and the home loan deduction from the second year on.
Others you generally claim yourself on a tax return: medical expenses, furusato nozei without the One-Stop Exception, the first year of the home loan deduction, the foreign tax credit, and the dependent deduction for overseas relatives.
Worth remembering: you can still file a return even after your year-end adjustment is done—so any deduction that got missed can be recovered later. Don’t just leave it all to the year-end adjustment; check each year for deductions that apply to you.
Chapter5: Frequently Asked Questions
Here we walk through the questions foreign residents in Japan tend to have about tax deductions in Japan, with answers to each.
Q1. Can I claim an overseas family member as a dependent?
Yes—if you meet the requirements, family living abroad can qualify for the dependent deduction. It’s conditional, though, on submitting or presenting documents that prove your family relationship and your remittances. Relatives aged 30 to under 70 in particular have to meet one of three conditions: study abroad, disability, or remittances of ¥380,000 or more that year. Each remittance has to be recorded per person—a single lump-sum transfer won’t meet the requirement.
Q2. Do I need to file a tax return, or is the year-end adjustment enough?
For most salaried workers, the year-end adjustment covers the basic deductions. But some deductions can’t be claimed without a tax return—medical expenses, the first year of the home loan deduction, and the foreign tax credit among them. Claiming overseas family as dependents also tends to push you toward filing, because of the documents involved. If even one of these applies to you, filing a return on top of your year-end adjustment helps you avoid leaving money behind.
Q3. I forgot a deduction last year—can I still get it back?
Yes—a missed claim from a past year may be recoverable through a refund claim. If a salaried worker forgot to claim a deduction, you can generally go back and file for up to five years, starting from the year after the one in question. Missed claims for medical expenses, furusato nozei, dependents, and more can be made later too, as long as you’re within the time limit. Gather the receipts and certificates you need, and work through it with guidance from the tax office.
Chapter6: Summary
Most foreign employees in Japan count as residents for tax purposes, which puts you in a position to claim the deductions covered here. The 2025 reform raised the baseline amounts for the basic and salary income deductions, shifting things in salaried workers’ favor.
The ones that are especially easy to miss: the dependent deduction for overseas relatives, social insurance premiums you paid for family, medical expenses, furusato nozei, the home loan deduction, and the foreign tax credit. Knowing which deductions the year-end adjustment can handle and which need a tax return is what keeps you from leaving money behind.
And if you forgot a deduction in the past, you may be able to go back up to five years to recover it. So before each year’s year-end adjustment or tax return, take a moment to check whether any of these deductions apply to you.
*This article is provided for general informational purposes only and does not constitute individual financial or legal advice. The figures shown here are based on the sources cited and will vary depending on your income, your family situation, and your residency classification for tax purposes. Information is accurate as of August 2026, and note that the 2026 tax reform revises some deductions from 2026 onward. Deduction eligibility, amounts, and whether you claim through the year-end adjustment or a tax return differ case by case and may change with future reforms, so please confirm with the National Tax Agency, a certified financial planner, a tax accountant, or another qualified professional before acting on any information in this article.
