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Tax guide for Americans in Japan

Tax guide for Americans in Japan

Last updated Apr 10, 2025

Moving to Japan offers a unique blend of opportunity and adventure, but one area that often surprises American expatriates is the complexity of Japanese taxes. From income tax to social security contributions, understanding how the Japanese tax system works is essential for anyone living or working in the country.

This guide breaks down what US expats need to know about Japanese taxes, including how residency status affects your tax obligations and what steps you can take to stay compliant with both Japanese and US tax laws. Whether you're just settling in or have been in Japan for years, getting a clear picture of your tax responsibilities is key to protecting your finances abroad.

Overview of Japan

Tax summary
Primary tax form for residents	Japanese individual tax return (Kakutei Shinkoku).
Tax year	January 1 – December 31
Tax due date	March 15
Criteria for tax residency	Reside in Japan for more than 183 days per year.
US tax filing requirements	Must file Form 1040 and report worldwide income.
Eligibility for FEIE	Qualify under the physical presence or bona fide residence test.
Methods of Double Tax Relief	Available through the US-Japan tax treaty and foreign tax credits.
Tax residency for dual citizens	Taxed by both countries, but the treaty helps avoid double taxation.
Estate and inheritance tax	Japan has an inheritance tax; the US estate tax may also apply.
Overview of local tax rates	Progressive rates up to 45% plus local taxes.

Japanese tax residency

When it comes to paying taxes in Japan, your residency status matters.

Japan divides people into three categories:

Non-resident
Just moved here? Haven't been here a full year? You're probably a nonresident. This means that Japan will only tax you on money you earn in Japan.
Non-permanent resident
Lived in Japan for less than five of the last ten years and don't have Japanese citizenship? That's you. You'll pay tax on income from Japan and some foreign income - if it's brought into Japan or paid here.
Permanent resident
If you've been here five out of the last ten years, you're in this group. Whether you're a Japanese citizen or not, Japan will tax your worldwide income - just like the US does.

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Types of taxation in Japan

Japan has a comprehensive tax system that affects both residents and non-residents. Here are the key types of taxes you should be aware of.

Personal Japan income tax rate

Japan's income tax is progressive, meaning the rate increases as your income increases. Tax rates range from 5% to 45%.

The tax rate for 2025 is:

*Taxable income (JPY)**	Tax rate (%)
0-1,950,000	5
1,950,000-3,300,000	10
3,300,000-6,950,000	20
6,950,000-9,000,000	23
9,000,000-18,000,000	33
18,000,000-40,000,000	40
40,000,000 and above	45

* Japanese yen

Local income tax

In addition to national income tax, you'll also pay local income tax in Japan - often called resident tax. It's levied by both your prefecture and your municipality.

Here's what you need to know:

It's based on last year's income, not your current income.
The total rate is usually around 10% of your taxable income.

Surtax

On top of the regular income tax, Japan adds a small extra charge - a 2.1% surtax. It's basically a tax on top of your income tax.

Here's how it works:

First, you calculate your income tax using Japan's standard tax brackets.
Then you add 2.1% to that total as a surtax.

Example:
Let's say your income tax is 1,000,000 JPY.
You'd owe an extra 21,000 JPY as surtax, bringing your total tax bill to 1,021,000 JPY.

Japan property tax

If you own real estate in Japan, you'll need to pay property tax, known as fixed asset tax.

Here’s the key info:

It’s an annual tax on land and buildings.
The standard rate is 1.4% of the assessed value, though some areas may charge slightly more.
Property owners also pay a separate city planning tax (usually 0.3%) if the property is in designated urban zones.

Japan consumption tax

Japan levies a consumption tax on most goods and services - similar to the VAT or GST in other countries.

A few key points:

It's a national tax that's included in the price you see in stores or on receipts.
Because it's already built into prices, you may not notice it - but it's there.
The standard rate is 10%, but some essentials like food, newspapers, and public transport are taxed at a lower rate of 8% to ease the burden on consumers.

So, while you don't usually see it broken out, this tax affects almost everything you buy in Japan.

Inheritance tax rates

Japan's inheritance tax applies to assets passed on after someone's death - and it can be substantial.

The tax is calculated based on the total value of the inherited assets.
Rates are progressive, ranging from 10% to 55%-the more you inherit, the higher the rate.

Your relationship to the deceased also matters. Close family members often face lower effective tax rates, while more distant relatives or unrelated heirs may pay more.

Taxable property less exemptions (JPY)	Tax rate (%)
0-10,000,000	10
10,000,000-30,000,000	15
30,000,000-50,000,000	20
50,000,000-100,000,000	30
100,000,000-200,000,000	40
200,000,000-300,000,000	45
300,000,000-600,000,000	50
600,000,000 and above	55

There are also special deductions based on family relationships that can significantly reduce the estate tax liability.

Capital gains tax

If you sell assets such as real estate or stocks in Japan and make a profit, you may be subject to capital gains tax.

For real estate, the tax rate depends on how long you've owned the property:

Short-term (held ≤5 years): taxed at 39.63%
Long-term (held >5 years): taxed at 20.315%

For stocks and other securities, capital gains are taxed at a flat rate of 20.315%.

Foreigners are taxed only on capital gains from assets located in Japan.

Japan has a strong social safety net. It covers health care, retirement, unemployment, and work-related injuries. If you live and work here, even for a short time, you'll probably have to pay into it.

Health Insurance:

Employee health insurance (健康保険, Kenkō Hoken) - for full-time employees of companies
National health insurance (国民健康保険, Kokumin Kenkō Hoken) - for freelancers, part-timers, and students. Both cover most of your medical bills. You usually pay about 30% out of pocket.

Pension.
If you're between 20 and 59, you're expected to pay into the state pension (国民年金, Kokumin Nenkin).
If you work for a company, you'll also be covered by an employee pension plan (厚生年金保険, Kōsei Nenkin Hoken).

These programs help when you retire - or if you become disabled or die, they help your family.

Unemployment insurance
Unemployment insurance (雇用保険, Koyō Hoken) can give you financial support while you look for work.
If you're employed by a company, you're probably already covered.

Workers' compensation
Workers' compensation (労働者災害補償保険, Rōdōsha Saigai Hoshō Hoken) covers treatment and lost wages.
It applies to all employees, no matter what your job.

The US-Japan tax treaty

Pay taxes in two countries? The US-Japan tax treaty is designed to make it easier and fairer.

Here's how it helps:

No double taxation
The treaty sets rules for who taxes what, so you don't pay taxes on the same income in both countries.
Lower withholding rates
If you receive dividends, interest, or royalties from Japan or the US, the treaty may reduce the amount that is withheld.
Foreign tax credits
Have you paid taxes in one country on income that is also taxed in the other? You may be eligible for a tax credit to offset the double hit.
Clear rules for retirement income
It also covers pensions and Social Security, so retirees know what to expect when it comes to taxes on these payments.

When are Japanese taxes due?

Japan's tax year follows the calendar - January 1 to December 31.

The deadline for filing your income tax return is March 15 of the following year. If you owe tax, it must be paid by this date to avoid interest and penalties.

Need more time to file?
You can file for an extension. But remember, the due date doesn't change. You still have to pay what you owe by March 15, even if you file later.

Japan tax forms for US expats

As a US expat living in Japan, you'll likely encounter a few local tax forms when filing your Japanese tax return. Here are the most important ones to know:

Form B
The form for most residents. It covers all types of income and allows you to claim deductions. Includes separate sections (schedules) for different sources of income.
Form 16
Used to report earned income and shows any taxes already withheld by your employer. You'll usually get this from your company.
Form 17
For the self-employed. You'll use this to report your business income and list your expenses.
Form 22
For reporting capital gains, such as profits from the sale of real estate or stocks.
Form 23
For reporting rental income from property you own.

These forms are key to complying with Japan's tax system - especially if you have multiple sources of income.