Japan Mortgage Tax Credit: How to Save Millions on Your Home Purchase

If you are planning to buy a house or apartment in Japan, the Mortgage Tax Credit (住宅借入金等特別控除 — 住宅ローン控除 / Juutaku Loan Kojo) is arguably the single most important tax relief program to understand. It acts as a direct tax credit—meaning it reduces your final tax bill yen-for-yen rather than just reducing your taxable income—potentially saving you millions of yen over its duration.

The Core Rules of the Credit

For properties purchased and occupied by the end of 2025/2026, the mortgage tax credit operates under the following parameters:

Credit Rate: 0.7% of your year-end mortgage loan balance is credited directly against your national income tax.
Duration: Up to 13 years for newly constructed homes (meeting energy efficiency standards) and 10 years for existing/used homes.
Loan Caps: The maximum loan balance eligible for the credit varies based on energy certification, ranging from ¥30 million for general housing to ¥40 million or ¥50 million for Net Zero Energy Homes (ZEH) and certified long-life housing.

Key Eligibility Requirements

To claim the credit, both you and the property must meet strict statutory requirements:

Primary Residence: You must occupy the property as your primary home within 6 months of purchase.
Income Cap: Your annual gross income (所得) must be ¥20 million or less in the years you claim the credit.
Floor Space: The floor area must be 50 square meters or more (reduced to 40 square meters for certain low-income households).
Loan Term: The mortgage must be from a Japanese financial institution with a repayment term of 10 years or more.

Used properties must also meet earthquake resistance standards (耐震基準). For wooden structures, they should generally be built within the last 20 years, or 25 years for reinforced concrete (RC) buildings, unless they hold a valid earthquake compliance certificate.

Stacking Deductions: Mortgage Credit, iDeCo, and Furusato Nozei

Many expats use multiple tax planning tools simultaneously. However, because the mortgage credit is a direct credit, it can interact with other deductions in ways that reduce its effectiveness:

1. The Deduction Sequence: Your gross income is reduced first by standard deductions (like social insurance and dependents), then by optional deductions like iDeCo. This determines your taxable income, which sets your base income tax. The mortgage credit is then applied against this base tax. If your iDeCo contributions reduce your income tax to zero, you cannot use the mortgage credit against income tax.

2. The Residence Tax Offset: If your eligible mortgage credit (e.g., ¥210,000) exceeds your national income tax liability, the unused portion can be refunded through your residence tax. However, this offset is capped at 97,500 yen per year (or 5% of taxable income). Any remaining credit beyond this cap is permanently lost.

Furusato Nozei donations generally do not conflict with the mortgage credit if you use the One-Stop Exception system, as the tax reduction is applied entirely to your residence tax in a way that preserves your income tax base.

How to File and Claim the Credit

To receive the credit, you must file a Kakutei Shinkoku (確定申告) during the tax season following the year you purchased your home. In subsequent years, if you are a salaried employee, the credit can be processed automatically by your company during the Year-End Tax Adjustment (Nenmatsu Chosei) by submitting your bank statement and tax certificates.

Use our Rent vs Buy Calculator to factor the mortgage tax credit into your long-term buy-vs-rent comparison. If you want to estimate your exact take-home pay, model it using the Income Tax Calculator.

For official guidelines, see the NTA Mortgage Deduction Guide and the MLIT official portal for housing policy.