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Real estate investment and tax saving in Japan

Real estate investment and tax saving in Japan

Some persons who receive excellent salary sometimes purchase old wooden house for their investment.

Because, depending on situation, they can reduce amount of tax in Japan.

Assumed that your salaried income in Japan is 15 million yen per a year.

As for Income tax (shotoku zei) in Japan

In the case of 15 million yen, employment income deduction (きゅうよしょとくこうじょ) is about 2.2 million yen.

And income deduction (しょとくこうじょ) is about 1.93 million yen.

(Breakdonw basic deduction : 380000 yen. Social insurance deduction is 1.55 million yen)

15 million yen – 2.2 million yen – 1.93 million million yen = 10.87 million yen.

10.87 million yen is taxable income of income tax.(かぜいしょとく)

10.87 million yen × 33% (income tax rate) – 1.53 million yen (deduction) = about 2.05 million yen.

2.05 million yen is the amount of income tax.


Regarding resident tax (Juminzei)

 

In the case of 15 million yen, employment income deduction (きゅうよしょとくこうじょ) is about 2.2 million yen.

And income deduction (しょとくこうじょ) is about 1.88 million yen.

(Breakdonw basic deduction : 330,000 yen. Social insurance deduction is 1.55 million yen)

15 million yen – 2.2 million yen – 1.88 million yen = 10.92 million yen.

10.92 million yen is taxable income of Resident tax.(かぜいしょとく)

10.92 million yen × 10% (resident tax rate) = about 1.09 million yen.

1.9 million yen + 7000 = 1.1 million yen.

This 1.1 million yen is amount of resident tax.

Depreciation cost of house can offset your taxable income

On the other hand, in the case you purchase an old wooden house and renting out, you can apply for depreciation cost.

Depending on appraised value of real estate, you may be able to reduce your taxable income by 1 million yen.

Then, when you sell the real estate after 5 years from your purchase, you need to pay income tax on real estate transfer.

However, in the case income tax, caused by sale of real estate, total rate of income tax and resident tax is 20%.

Total rate of income tax and resident tax is 20%.

Total rate mentioned above is about 40%.

So, you may be able to receive some tax merit.

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