Govt Considering Extending Mortgage Loan Tax Deduction for Homeowners in Japan

The Japanese government is considering extending the move-in deadline for homeowners who wish to qualify for an additional three years of being allowed to deduct one percent of their outstanding mortgage loan amount from their income tax liability.

Claiming the Home Mortgage Deduction

The home mortgage loan deduction currently lets homeowners with outstanding loan balances deduct 1% of the year-end mortgage balance from their income tax and resident’s tax.

This deduction currently can be taken over a 13-year period for outstanding balances of 40 million JPY or less, so the maximum deduction comes to 400,000 JPY.

If your home is certified as “long-term excellent housing” (長期優良住宅) or certified as “low-carbon housing” (低炭素住宅), this deduction applies to balances of 500 million JPY or less, or a maximum of 500,000JPY per year.

13-year period deduction

Currently, to qualify for the 13-year period deduction, you have to move into your home by December 31, 2020.

This is because the usual deduction is only allowed over a ten-year period. This was extended to 13-years when the consumption tax was raised to 10 percent on October 1, 2020, in order to mitigate the financial impact for homebuyers. Sales of newly constructed condominiums and free-standing houses are subject to consumption tax. Re-sale houses and apartments are not.

The government is considering extending the move-in date (the date by which you have to move into your newly purchase home) by two years, to December 31, 2022. The real estate industry is also lobbying for this two-year extension. The Ministry of Land is apparently supportive of the extension but the Ministry of Finance is reportedly cautious about extending the deadline.

According to the National Tax Agency, 248,000 people were eligible for the mortgage deduction in 2018.

The government is concerned that the various measures implemented to deal with the coronavirus will hit home sales, so it is eager to provide support for potential homeowners who may not be able to immediately move into their new homes. The delivery date of some newly constructed condominiums, for example, has had to be pushed back due to delays in getting the appropriate materials and fixtures, many of which are imported from China.

Nationally, demand and housing starts have both been sluggish this year due to the coronavirus pandemic. Nationwide, in July (the latest data available) there were about 70,000 units (down 11.3% YoY). However, demand for new apartments in Tokyo remains strong. As the government continues to call for self-restraint in going out, the real estate industry has seen numbers of potential buyers at model homes and housing exhibitions slow accordingly. Industry groups are thus eager to cultivate demand and are urging the government to extend eligibility for the mortgage tax deduction.

FAQs About Buying Property in Japan

Can a foreigner buy property in Japan?

Yes. You can buy property in Japan regardless of your nationality or country of origin. There are also no residency requirements for buying real estate in Japan. Securing financing as a resident foreigner is more complicated. For info on financing, please see “Basic Requirements for Getting a Mortgage as a Foreigner in Japan“.

How do I get a property loan as a foreigner in Japan?

Please see this article for information on: Getting a property loan as a foreigner in Japan

What is the process for buying a property in Japan?

Please see our step-by-step guide: Guide to Buying Property in Japan

See how much you can borrow and your monthly payments in yen: Yen Mortgage Loan Calculator

For information about purchase and brokerage fees: Breakdown of real estate purchase fees and taxes in Japan

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