Tax Planning
Navigating Japan’s Recent Income Tax Reforms: What's New for Expats and Residents
Recent changes to Japan's individual income tax system, including base deduction increases and spouse/family exemption updates, have significant implications for both expatriates and Japanese residents—learn how to optimize your tax position now.
By NomadicTax Research Team • 6-7 min read • September 3, 2026
## Introduction
Japan has recently made substantial changes to its individual income tax system under the **令和8年度税制改正** (Fiscal Year 2026 tax reform), affecting both residents and non-residents. These changes include increases in the 基礎控除 (basic deduction), updates to 給与所得控除 (employment income deductions), and revisions to spouse/family income thresholds. This article will guide you through practical implications and tax planning strategies, especially for expats.
## Key Reform Highlights
- The **基礎控除** amount is increased for individuals with 合計所得金額 (total income) up to ¥23,500,000, broadly expanding relief for many taxpayers. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_gaiyou.htm?utm_source=openai))
- Employment income deductions (給与所得控除) now have a raised minimum standard—former minimums are increased to provide more relief to lower-income earners. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_gaiyou.htm?utm_source=openai))
- For扶養親族 (dependent family members), the income thresholds for certain deductions have been revised. This impacts families with members abroad or those switching in/out of resident status. ([nta.go.jp](https://www.nta.go.jp/taxes/tetsuzuki/shinsei/annai/gensen/kokugai/index.htm?utm_source=openai))
## Implications for Expats and Non-Residents
### Residency Status
Expats moving abroad or transitioning in/out of Japanese residency should note that:
- **扶養控除等 (family/dependent deductions)** are available only if you submit required documentation (親族関係書類 and proof of funds transfers) whether or not the dependent lives overseas. ([nta.go.jp](https://www.nta.go.jp/taxes/tetsuzuki/shinsei/annai/gensen/kokugai/index.htm?utm_source=openai))
- Those who leave Japan during the year (非居住者) may lose eligibility for certain deductions. Careful timing and documentation are crucial. ([nta.go.jp](https://www.nta.go.jp/users/gensen/2025kiso/index/shinkoku.htm?utm_source=openai))
### Income Brackets and Deductions
- With the basic deduction increase up to ¥4,000 raise for many incomes ≤ ¥23,500,000, some expats may see lower taxable income even if gross incomes remain the same. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_gaiyou.htm?utm_source=openai))
- Minimum employment income deductions have risen, benefiting lower to mid-income earners. Expat assignments with Japanese-source salaries will see more favorable net income. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_gaiyou.htm?utm_source=openai))
## Tax Planning Strategies
- **Gather documentation early**: If you claim扶養控除 for foreign dependents, ensure you have **親族関係証明** and **送金関係資料**, and provide translations if needed. ([nta.go.jp](https://www.nta.go.jp/taxes/tetsuzuki/shinsei/annai/gensen/kokugai/index.htm?utm_source=openai))
- **Monitor your income levels**: As income moves between thresholds (e.g., around ¥489万円, ¥655万円, or ¥2,350万円), deduction amounts change sharply. Plan bonuses or income timing accordingly. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_gaiyou.htm?utm_source=openai))
- **Residency timing matters**: If you are leaving or leaving Japan mid-year, know whether your final year will be taxed as resident or non-resident status—this affects eligibility for deductions. ([nta.go.jp](https://www.nta.go.jp/users/gensen/2025kiso/index/shinkoku.htm?utm_source=openai))
## Example Scenarios
| Situation | Before Reform | After Reform | Net Effect |
|---|---|---|---|
| Expat earning ¥5,000,000 living in Japan with one foreign spouse | Basic deduction ~ ¥480,000, spouse deduction possibly limited | Higher basic deduction (depending on income), revised spouse eligibility thresholds | Taxable income drops, produce savings of several tens of thousands of yen |
| Resident with income ¥700,000/year of employment income | Minimum employment income deduction was lower | New minimums apply raising deduction | Proportionate increase in disposable income |
## Action Items
- Review last year’s withholding (源泉徴収) based on new tables—adjust estimates for year-end to avoid surprises. ([nta.go.jp](https://www.nta.go.jp/publication/pamph/gensen/zeigakuhyo2026/01.htm?utm_source=openai))
- If using tax agents or payroll service providers, confirm whether they’ve updated software to incorporate new deductions. Errors can lead to under-withholding or missed refunds.
- Keep up to date on further changes—some reforms (e.g. higher bracket rates, special deductions) will take effect from **令和9年分以後** (tax year 2027 onwards). ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_gaiyou.htm?utm_source=openai))
## Summary
These reforms tilt the tax system in favor of middle- and lower-income earners, with expanded basic and employment income deductions and more accessible family deductions—even for non-resident dependents. Expats can benefit by planning income timing, ensuring compliance, and leveraging documentation. For many, the net tax payable will be meaningfully reduced. Investing some effort now to understand the changes will pay off when filing next year.