Does the 2026 deduction reform apply to residence tax?

No, and this is the trap. The reform raises the national basic deduction to 1,040,000 for most earners, but the local inhabitant tax basic exemption stays at 430,000. The two taxes are therefore computed on bases that differ by 610,000 at the common tier.

Why does the residence tax figure not match my current pay?

Residence tax is assessed on the previous year of income, with liability fixed by whether you were a registered resident on 1 January. The figure shown is the steady state, meaning what someone on this salary pays once established. A new arrival pays none in their first calendar year and then sees roughly 10% more deducted in year two.

Are bonuses included?

No. Japanese seasonal bonuses are substantial and carry their own standard bonus contribution limits, so they are excluded. Enter base pay only; actual annual pay including bonuses is often 16% or more above base pay times twelve.

Japan Methodology 2026

Model

Salaried employee paid in twelve equal instalments, Tokyo health insurance rate by default, under 40 unless you say otherwise. Income year 2026 is the calendar year.

Source

Income tax figures come from the National Tax Agency's own pages for 2026: the rate table (No.2260), the employment income deduction (No.1410) and the basic deduction (No.1199). Contribution rates are the published FY2026 figures for health and long-term care, the employees' pension rate and ceiling, and the employment insurance rate.

What 2026 changed

The employment income deduction floor rose from 650,000 to 740,000 and the basic deduction reached 1,040,000 for total income up to 4.89 million, tapering to 670,000 and then 620,000. Together they make salary up to 1,780,000 free of income tax, the successor to the much publicised 1.03 million threshold.

Two bases that diverge

The reform applies to national income tax only. The local inhabitant tax basic exemption stays at 430,000, so for 2026 the national and local taxable bases differ by 610,000 at the common tier and are computed separately. Social insurance is fully deductible against both, so it is calculated first. A calculator that applies the larger national deduction to residence tax as well will overstate take-home pay, and the divergence is asserted directly in the tests.

Components

Income tax uses the seven band table with its published deduction amounts, on taxable income rounded down to a whole thousand yen. The Special Reconstruction Income Tax adds 2.1% of the income tax amount. Residence tax is 10% of its own base plus a 5,000 per capita levy. Employee contributions are pension at 9.15% capped at 650,000 of monthly standard remuneration, health at half the prefectural rate, long-term care at 0.81% for ages 40 to 64, the new child and childcare support levy at 0.115% from April 2026, and employment insurance at 0.5% of total wages. For an under 40 Tokyo employee below the ceilings that totals 14.69% of pay.

Scope and limits

Bonuses are excluded, along with their separate contribution limits. Contributions are taken on actual pay rather than the standard monthly remuneration grade tables, which differs by at most half a grade. Dependants and their deductions are not modelled, nor is the residence tax adjustment deduction, worth a few thousand yen a year, whose 2026 input values could not be verified. The Special Defence Income Tax is not applied because it starts in 2027; when it does, it takes 1% while the reconstruction component falls to 1.1%, leaving the combined 2.1% unchanged.

Verification

Twenty three automated tests cover the published tables, the employment deduction's continuity at every band edge, the basic deduction tiers, the base divergence, the contribution ceilings and the 44.2% top marginal rate. The National Tax Agency's own worked example is used as a fixture, and the full breakdown at the Japanese average salary was reconciled by hand against the tables.

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Japan methodology (2026)