Back in October 2019, the consumption tax（消費税）in Japan increased from 8% to 10%. With the tax rate increasing, the Central government of Japan placed certain plans in place to fight against the consumer spending slum Japan experience back in April 2014 (5% to 8% consumption tax increase).
Some of the polices put in place were to keep the consumption tax rate at 8% for food and beverages, and since we are a real estate Agency, we will discuss the tax deduction for homeowners.
The home mortgage deduction allows home owners to deduct 1% from the outstanding balance from their income and resident’s (local) tax.
The restriction for the deductions is either a 10 year span or a maximum of ¥4,000,000, whichever comes first. Simple math has the maximum deduction at ¥400,000 per year.
Because of the consumption tax hike to 10% last October (2019), the home mortgage deduction was amended. The current policy allows home owners to deduct 1% from their outstanding balance from their income and resident’s (local) tax for a maximum of 13 years or ¥4,000,000. The maximum deduction per year would be the same as the initial policy at ¥400,000 per year.
For those homes which are considered “long-term excellent housing” (長期優良住宅) or distinguished “low-carbon housing” (低炭素住宅), the maximum amount deductible being ¥500,000 per year.
To fit within the new policy laid out last fall, the homeowner’s would have to move into their home by December 31, 2020.
The properties which qualify for the homeowner’s tax deduction will be properties larger than 50m².
Amendment to the Amendment
We are assuming with the economic impact COVID-19 has had on the Japanese Economy the Central Government is looking to amend their amendment from October 2019.
The amendment will and or planned to be in the move-in date to qualify for the extension on the homeowner’s tax deduction.
New move-in date: December 31, 2022.
With this amendment, the Central Government are allowing home owner’s of properties larger than 40m² to potential qualify for these benefits as well. Certain restrictions for the smaller properties will apply
The official announcement should be made around December 10th with the Central Government’s formal outline to be shared with the public.
For the fiscal year 2021, the Central Government will continue to allow home owners to deduct the 1% from their outstanding balance. This will be reviewed for the 2022 Fiscal Year.
Considering interest rates for home mortgage loans are extremely low, with interest rates below 1%, there may be another revision to the policy in the future.
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