The information below is provided as a general guide only. For details on the home loan tax deduction, please refer to https://sumai-kyufu.jp/ website (Japanese language only), or discuss with an accountant or tax professional.

The home loan tax deduction allows you to deduct 1% of your remaining home loan from your income tax each year for up to 10 years. If the deduction exceeds your income tax liability, the remainder may be deducted from your municipal tax (limits apply).

Details (in Japanese) may be viewed here: http://sumai-kyufu.jp/outline/ju_loan/

A special three-year extension applies for residences that are moved-into between October 1, 2019 and December 31, 2022, where the 10% consumption tax rate was applied to the purchase. Be aware that consumption tax may only apply in certain real estate transactions.

	From April 1, 2014 ~ December 2021	From October 1, 2019 ~ December 31, 2022 [*1]
Maximum deduction	4,000,000 Yen (400,000 Yen x 10 years)	4,000,000 Yen (400,000 Yen x 10 years) for years 1 ~ 10
Deduction %	1%	1%
Term	10 years	10 years + 3 year extension
Maximum deduction from municipal tax	136,500 Yen/year (7% of taxable income from preceding year)	136,500 Yen/year (7% of taxable income from preceding year)

Conditions:

• 10% consumption tax rate must apply to the sale price. Consumption tax does not apply in all transactions. Unsure if it applies? Ask your real estate agent. If the consumption tax rate does not apply, the maximum annual deduction is capped at 200,000 Yen/year.
• Floor area over 40 sqm or 50 sqm (inner-wall measurement for apartments, and center-wall measurement for houses). For a floor area of over 40 sqm but under 50 sqm, the borrower’s total annual income must be below 10 million Yen.
• Mortgage term over 10 years.

Notes:

[*1] From years 11 ~ 13, the following can be deducted from the borrower’s annual income tax (the lowest amount applies):
(1) 1% of the remaining loan balance or acquisition price (not exceeding 40 million Yen); or
(2) Building acquisition price (not exceeding 40 million Yen) x 2% / 3

*Properties designated as long-term superior housing and low-carbon housing have a maximum deduction of up to 5,000,000 Yen (from April 1, 2014 until December 2021).

Who is eligible?

The deduction is only available for personal residences and cannot be used for holiday homes, second homes or rental properties.  The tax office will require proof of residence. You must also move into the residence within 6 months of purchase.

Your personal annual income must not exceed 30 million Yen.

Non-residents (those who are living overseas and who do not have residence in Japan) are not eligible.

What kind of properties are eligible?

• Homes with a floor area over 50 sqm.
• Homes with a floor area over 40 sqm (applies for residences moved into between January 1, 2021 to December 31, 2022), and for borrowers with a maximum annual income of under 10 million Yen.
• Brand new homes.
• Secondhand homes:
  • For wooden construction: Less than 20 years old
  • For concrete construction: Less than 25 years old
    Or:
  • Must have a certificate to show the building meets earthquake-resistant standards
  • Must be covered under a warranty against defects

How and when to apply?

The initial paperwork must be submitted at the same time as your final income tax return. That will usually be the period between February 16 and March 15 of the year following the time you moved into the property. For subsequent years the paperwork should be submitted at the time of your end-of-year tax adjustment if you are a salaried employee, or with consequent final income tax returns if you are self-employed or otherwise.

The information above is provided as a general guide only. For details on the home loan tax deduction, please refer to https://sumai-kyufu.jp/ website (Japanese language only), or discuss with an accountant or tax professional.