Mortgage Loan Tax Deduction Incentives for Homeowners in Japan to be Extended in 2022

The Japanese government has extended tax deductions for mortgage loans for homeowners for 2022 and beyond in order to spur economic recovery and help middle-income earners buy their own homes.

Here are the key incentives to be aware of.

1. Move-in date for home mortgage deduction period to be extended to December 31, 2025

This home mortgage loan deduction incentive will allow homeowners with outstanding loan balances to deduct 0.7% of the year-end mortgage balance from their income tax and resident’s tax.

  • For newly constructed homes, the deduction can be taken over a 13-year period.
    • To qualify for the deduction for newly constructed homes that receive their certificate of construction in 2024 or thereafter, the property has to also meet applicable rules for low-energy homes.
  • For existing homes, the deduction can be taken over a ten-year period.

Note that this is a change from the 1.0% deduction allowed in 2021.

Income Limits

The income qualification to take the mortgage deduction has also been relaxed. Previously to be able to qualify, total annual income had to be less than ¥30,000,000. This has been reduced to ¥20,000,000.

Previously the deduction was 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.

Floor Area Limits

The floor area requirement for newly constructed houses has also been relaxed to cover properties with a total floor area of 40-sqm or more, for properties which received their certificate of completion prior to 2023. This is an extension of the incentive that was originally introduced in 2021, which lowered the minimum required floor area from 50-sqm.

There is also an annual income limit of ¥10 million for taking this deduction. The income limit  was put in place because the deduction is meant to be used for owner-occupied homes, not investment properties and to encourage middle-income people to buy new homes. Many retail investors buy investment properties in urban centers that are smaller-sized apartments.

2. Extension of tax exemption for monetary gifts to be used for purchasing a home

This exemption will be extended for another two years (2022 to 2023) and covers money that is received in order to buy a home.

For homes certified as “good quality” housing, the maximum tax exempt amount is ¥10,000,000. For all other housing the maximum amount if ¥5,000,000.

This tax exemption can be used for both newly constructed and existing homes.

3. Extension of reduction for fixed-asset taxes for newly constructed homes only

The government will also extend for another two years (2022 to 2023) the special measure that allows owners of newly constructed homes to pay a lower assessed amount. For more on this, please see this article: Special treatment for residential property taxes.

Note that this is a change from what was discussed at the end of November 2021, when the government had indicated that this extension would be eliminated in 2022.

Source: Ministry of Land, December 24, 2021 press release (PDF in Japanese)

Lead image: Japanese apartment interior, iStock 177391510

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

Seminars on Buying Property in Japan

Please see our seminar page for a current list of seminars on: how to buy a home in Japaninvesting in Japanese real estate for beginnershow to apply for permanent residency in Japanhow to sell property in Japan, and much more.

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

Need to Know

Leasehold rights in Japan: Advantages and disadvantages

Earthquake building codes and technology in Japan

Can I legally rent out my home in Japan on AirBnB?

Repair reserve fund fees explained

Parking spaces in Japanese condominium buildings explained

Building your own home in Japan

Bilingual Real Estate Agent in Tokyo Answers Your FAQs on Buying and Managing an Investment Property

How much is my property worth?

Real Estate Japan is pleased to offer free, no obligation appraisals for owners of property in Japan. Please click here and fill out the form: How much is my property worth?

7 situations when you should consider selling your investment property in Japan

What are the main factors affecting home sale prices in Japan in 2019?

Akiya Banks in Japan

Tokyo Apartment Market Forecast: Trends to watch for in 2022

Kansai Apartment Market Forecast: Supply and price trends to watch for in 2022