Tax deduction of 4 million yen in Japan
In the event that you have built brand new house （ Shinchiku ）or purchased second hand real estate ( Chuko ) for residence with bank loan, depending on situation, you can apply for tax credit ( zeigaku kojo = 税額控除 ).
This is called ” housing loan deduction = jutaku loan kojo = loan genzei = home loan deduction = ローン減税 “.
In order to apply for this housing loan deduction, you need to file tax return by yourself.
（Even if you are salaried worker, you need to do it.)
If you can apply for this deduction, you can reduce the amount of tax at maximum 400,000 yen per a year.
And you can reduce the amount of tax at maximum by 4 million yen for ten years.
400,000 yen × 10 years = 4 million yen.
If you purchase a real estate from Individual, amount of deduction is 2 million yen
However, in the case you have purchased your real estate without paying consumption tax of 8 %, the amount above is 2 million yen and 200,000 yen.
In the case you have purchased your real estate from real estate company, purchase price for building includes consumption tax of 8%.
However in the case you have purchased the real estate from individual, you do not need to pay consumption tax.
So, basically you have purchased the real estate cheaper by 8% than in the case seller is real estate company.
So, in the case you have purchased your residence from individual, if you can apply for this deduction, you can reduce the amount of tax at maximum 200,000 yen per a year.
And you can reduce the amount of tax at maximum by 2million yen for ten years.
200,000 yen × 10 years = 2 million yen.
Tax deduction of 5 million yen
In the case you have built ( Not purchased ) real estate of long term superior residence ( choki yuryo jutaku = 長期優良住宅 ) or low carbon residence ( tei tanso jutaku = 低炭素住宅 ), you can apply for housing loan deduction of at maximum 5 million yen.
When you apply for housing loan deduction for the first time, you need to file tax return.
However after that, you do not need to conduct tax filing by yourself.
Your employer can take necessary process on your behalf.
Assumed that you have built or purchased your residence in January, 2016 at 101 yen by loan ( hereinafter referred to as ” case 1 ” ).
In this case you will file tax return to apply for housing loan deduction in and after January of 2017.
Then, you do not need to file tax return in and after January of 2018.
After your tax filing in January of 2017, some papers will be sent to you by post and you can submit these papers to your employer.
And your employer can conduct year end adjustment by reflecting your housing loan deduction for nine years.
So, your employer will know your housing loan amount….
If you can apply for housing loan deduction, depending on the amount of remaining loan, a part of income tax and resident tax is reimbursed to you.
Amount of your salary should be 30 million yen or less
In order to apply for this deduction the amount of your annual income should be 30 million or less.
( This 30 million yen does not coincide with your earnings.
The amount of your income = your salary – several deduction, like dependents deduction, social insurance premium deduction etc).
You need to live the real estate purchased by you
You need to use the house for your residence within 6 months after your purchase or completion of building.
And you need to have lived there until end of the year.
If you want to apply for housing loan deduction for income earned within 2016 ( You can file tax return after end of 2016 ), you need to live in the real estate until end of 2016.
You can not apply for other tax deduction simultaneously
In “case 1”, if you have applied for special deduction for persons who sold their residence etc ( Kyojuyo zaisan no jodo no tokurei = 居住用財産の譲渡の特例 ) during 2013 to 2018, you can not apply for housing loan deduction.
And if you have left the real estate in 2017, you can not apply for home loan deduction for income earned in 2017.
Your real estate should not be your office space
Even if you have not left the real estate, if you use the real estate mainly as your office or renting out and receive rental fee, you can not apply for housing loan deduction during that period.
Borrowing period from bank
And borrowing period from bank etc should be ten year or more etc, you need to satisfy several conditions.
Even if you have borrowed money from your employer, you can apply for housing loan deduction.
However, in the case you borrow money from your employer with borrowing rate of less than 1%, you can not apply for housing loan deduction.
And the loan should be related to your residence, not business.
So, if you want to include depreciation cost of your real estate or / and borrowing rate for calculation of your business income tax and purchased the real estate under your name or your company, you can not apply for this housing loan deduction.
Even if you operate your business in your residence, as far as the area for your business is less than 50% of total room area, you can apply for housing loan deduction.
Generally speaking, though this policy has been changed several times, 1% of remaining loan amount is reimbursed to you for 10 years ( In the case you built or purchased your residence in and after year of 2016 ).
Assumed that you have built or purchased your residence in January, 2016 at 101 yen by loan ( case 1 ).
Amount of remaining loan at end of 2016 is 100 yen ( You repaid 1 yen during 2016).
You have paid income tax and resident tax of 5 yen during 2016.
( Your employer withheld 5 yen from your salary )
In that case, if you apply for housing loan deduction ( within 5 years from your purchase or building. But you need to file tax return by mid of March of following year. ), 1 yen is reimbursed from your income tax. ( 100 yen × 1% = 1 yen )
On the other hand, if you have borrowed 101 yen from bank and the purchase price of real estate is 81 yen, you can apply for housing loan deduction for only this 81 yen.
Because, tax office presumes this 20 yen ( 101 yen – 81 yen ) is not borrowing to purchase your residence.
( When you purchase real estate, you will pay realtor fee etc. However, these fees are not included in purchase price )
In this way, Japanese government aims to support persons to build or purchase their residence.
In the case persons file tax return, they need to do it during mid of February and Mid of March.
However, in the case of tax filing who can receive reimburse can conduct tax filing from January.
So, in the case of tax filing for housing loan deduction, you can do in and after January of 2017 ( in the case of “case 1” )
Which tax office you can apply for housing loan deduction
You can file tax return with tax office that has jurisdiction over your residence.
So, if you are living in Kachidoki, Chuo-ku, Tokyo and working in Roppongi, Minato-ku,Tokyo, you need to file tax turn to tax office in Chuo-ku ( To be precise, Kyobashi zeimusho ).
You can file tax return by bringing in application papers and other necessary documents or by post.
Or depending on your preparation, you can file it via internet.
Necessary documents to file tax return of housing loan deduction.
2 Statement of calculation of housing loan deduction = 住宅借入金等特別控除額の計算明細書
In this form, you need to conduct complex calculation.
3 Your certificate of residence = Juminhyo
Address on this certificate should coincide with address of real estate.
4 Certified copy of real estate registry = Tohon = Toki jiko shomeisho = 登記事項証明書
In this paper, officer of tax office can know age of building, room area ( the registered room area should be 50 square meters or more ) of your residence etc.
And if you have purchased hotel or office and live there, you can not apply for housing loan deduction.
In the case you and your spouse have purchased residence jointly, the registered floor area is not divided by you and your spouse.
So, you and your spouse have purchase residence of 50 ㎡, as far as other requirements are satisfied, you and your spouse can apply for housing loan deduction.
5 Scanned copy of Purchased contract of real estate.
In this paper, officer can know you have purchase the real estate.
In the case you have purchase the real estate from your relatives etc, you can not apply for this housing loan deduction.
6 Withholding tax slip = gensen choshu hyo.
Your employer can provide it.
Even if your employer has conducted year end adjustment, result of housing loan deduction is not reflected on this paper.
So, you need to file tax return by yourself.
7 Paper that certifies remaining of loan amount at the time of year end.
Your bank etc will send it to you.
If you have purchased real estate in December, this paper will be sent to you after January.
So, you may not be able to file tax return within January.
Anyway, you can file this tax return for another 5 years.
( However, in “case 1”, if you do not file tax return by mid of March of 2017, the amount of reimburse will decrease. )
So, you can dodge crowded season.
8 Paper that certifies capacity of your residence against earthquake or quality of your real estate = 耐震基準適合証明書又は住宅性能評価書の写し.
In the case age of your residence is more than 20 years ( In the case of wooden house ) or 25 years ( In the case of concreted building ) or more, basically you can not apply for housing loan deduction.
However if you have these certificates, you can apply it.
( Unfortunately, in most of cases, your residence does not have this paper.
So, basically age of your real estate should be within 20 year or 25 years.)
In the case you and your spouse borrowed money jointly ( joint surety = rentai saimu = 連帯債務. You and your spouse are debtors. Not guarantor ), you and your spouse need to respectively file tax return.
If your spouse does not income, your spouse can not receive reimburse.
Because, your spouse has not paid income tax.
Once you have filed tax return for housing loan deduction, a part of income tax paid by you is returned to your bank account.
It will take one month after tax filing.