There has been a major change to the basic deduction amount for 2025 and onwards.
tsuzukizeirishiOverview
A major revision to the basic deduction amounts (基礎控除) have been enacted for tax year 2025 and onward.
Revised Basic Deduction Amounts
| Total Income (JPY) | Basic Deduction (After Revision) | Basic Deduction (Before Revision) |
|---|---|---|
| Up to ¥1,320,000 | ¥950,000 | ¥480,000 |
| Over ¥1,320,000 and up to ¥3,360,000 | ¥880,000 | ¥480,000 |
| Over ¥3,360,000 and up to ¥4,890,000 | ¥680,000 | ¥480,000 |
| Over ¥4,890,000 and up to ¥6,550,000 | ¥630,000 | ¥480,000 |
| Over ¥6,550,000 and up to ¥23,500,000 | ¥580,000 | ¥480,000 |
| Over ¥23,500,000 and up to ¥24,000,000 | ¥480,000 | ¥480,000 |
| Over ¥24,000,000 and up to ¥24,500,000 | ¥320,000 | ¥320,000 |
| Over ¥24,500,000 and up to ¥25,000,000 | ¥160,000 | ¥160,000 |
| Over ¥25,000,000 | ¥0 | ¥0 |
For non-residents with total income up to ¥23,500,000, a flat deduction of ¥580,000 applies.
Application and Transition
- Effective Tax Year: The revised basic deduction applies beginning with the 2025 tax filings.
- Withholding Through November: Income tax withheld from salaries and pensions will remain based on the pre-revision amounts through November of 2025.
- Year-End Adjustment: From December 2025 onward, year-end adjustments (年末調整) will apply the new deduction amounts to recalculate annual tax liability and reconcile any over- or under-withholding.
Recommendations
Since both employees’ refunds and employer cash-flow requirements are expected to increase, it is advisable for companies with a large workforce to set aside additional funds in anticipation of larger year-end tax refunds.
Future Outlook
- Limited Duration: These revisions are temporary measures for tax years 2025 and 2026 only.
- Beyond 2026: Starting with the 2027 tax year, the deduction amounts may be further amended through future Diet deliberations. Depending on ongoing legislative discussions, even the 2026 amounts could change before then.
- System Complexity: As income deductions become increasingly complex, discussions about abolishing the year-end adjustment system occasionally surface. Once smartphone-based e-filing becomes widespread, full abolition of the current adjustment system might occur in the not-too-distant future.
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都築太郎税理士事務所/Tsuzuki Taro Tax Accountant Office
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