Each year, the lower of the following two amounts is deducted from your income and local taxes
1. Balance of mortgage loan at the end of the year x 0.7%
Note: The amount of a given subsidy or gift, etc. may be deducted. For details, please contact the tax office within your jurisdiction.
2. Maximum deduction per year
For example, if a new long-term excellent housing or low carbon housing is built and occupied in 2023, the maximum deduction for one year is 350,000 yen.
However, if the mortgage balance at the end of the year was 45 million yen, the maximum deduction calculated from the balance would be 45 million x 0.7% = 315,000 yen
Since it is lower than 350,000 yen, the actual deduction is limited to 315,000 yen.
If you want to find out how much you’ll recieve back, run a simulation.
After understanding the concept of the deductible amount, the actual amount that can be deducted and can be seen by applying the amount of income tax and inhabitant tax to be paid.
Let’s take an example of the calculation.
The conditions used in the calculation are as follows:
- Occupied in 2023 in a newly built long-term excellent housing
- Mortgage balance at the end of the year: 30 million yen
- Acquisition price of the house: 35 million yen
- Income tax to be paid: 70,000 yen
- Resident tax for the following year: 160,000 yen
First, let’s find out the amount you can deduct per year.
In the case of a newly built long-term excellent housing or low-carbon housing to be occupied in 2023, the maximum deductible amount is as follows;
Maximum borrowing amount of 50 million yen with a deduction rate of 0.7% = 350,000 yen
However, if the balance of the mortgage is used as the basis, the following calculation is used.
Mortgage balance at the end of the year 30 million yen x 0.7% deduction rate = 210,000 yen.
In other words, 210,000 yen, which is lower than 350,000 yen, is the amount that can actually be deducted.
Next, let us look at income tax and resident (local) tax.
Since the deduction amount of 210,000 yen is larger than the income tax of 70,000 yen that should be paid, payment of income tax is not required.
The 140,000 yen that could not be deducted from income tax will be deducted from the following year’s resident tax.
However, since the maximum deduction from the resident tax is fixed at 97,500 yen, the actual amount deducted is as follows;
70,000 yen for income tax + 97,500 yen for resident tax = 167,500 yen in total.
Similar calculations can be made for the second and subsequent years, so if you are interested, please make a trial calculation.
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