Tax Planning

Planning for High Incomes: Japan’s New Bracket & Minimum Deduction Changes

Starting April 2026, Japan restructured its deduction thresholds and base for high-income earners. Here’s what to consider if you expect to make ¥20 million or more.

By NomadicTax Research Team • 5-8 min read • August 15, 2026

## Key Reforms Effective from 2026 Details Japan’s recent tax reform (令和8年度税制改正の大綱) introduced important changes for **high income taxpayers**: the so-called “tax fairness” measures. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_gaiyou.htm?utm_source=openai)) ### What’s Changed? - The **special deduction amount** from “基準所得金額” (standard income base used in surtaxes/additional burdens) is cut from **¥33 million** to **¥16.5 million**. Simultaneously, the **rate** that applies on income above that base is raised from **22.5% to 30%**. These changes aim to increase fairness by increasing burden on very high incomes. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_gaiyou.htm?utm_source=openai)) - **Basic deduction** (**基礎控除**) increased by ¥40,000 for individuals with total income up to ¥23.5 million. For those above certain income levels, deductibility phases down. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_gaiyou.htm?utm_source=openai)) - **Lowest guaranteed level** for the **salary income deduction** raised from ¥65,000 to **¥69,000** for FY 2026 and 2027. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_gaiyou.htm?utm_source=openai)) ## How to Plan Accordingly - **Recompute your taxable income projections** to see whether you cross new thresholds; you may be subject to higher effective marginal rates than under prior rules. - If bonuses, RSUs, or capital gains are due, consider timing them to years when you are below the cutoff. - Make use of deductions (like housing loan deductions, investment deductions, etc.) that can reduce taxable income before the higher surtax base applies. - Adjust estimated withholdings so tax payments don’t result in large unexpected final assessments. ## Example Suppose Hiro, a Tokyo resident, expects ¥40 million of total income in 2026 from salary and investment. Under old rules, he was enjoying a ¥33 million special deduction and rate of 22.5% beyond that. Under new rules, only ¥16.5 million deduction applies; income above that is taxed at **30%** special rate. This increases his tax payable significantly—proper planning around deductions and income recognition becomes essential. ## Wrap-Up These reforms reflect Japan’s shift toward greater progressivity at the top income levels. Taxpayers earning high incomes should revisit withholding, investment timing, and use of deductions now.