The "resident tax" you see on your pay slip or tax notice. It resembles income tax, but it has its own rules: it is levied the following year on the previous year's income, the rate is a flat 10%, and there is a fixed per-capita levy. Much of the confusion — "it suddenly went up in June," "a large bill came the year after I left my job" — makes sense once you understand this mechanism. This article organizes the calculation method, how to pay, the tax-exempt line, and points for reducing resident tax in an easy-to-understand way.
Resident tax = "income levy" + "per-capita levy"
Individual resident tax is a tax paid to the prefecture and municipality where you live, and it is the sum of the following two parts.
The standard rate of the income levy is 10% (municipal resident tax 6% + prefectural resident tax 4%). The per-capita levy is roughly 5,000 yen (municipality 3,000 yen + prefecture 1,000 yen + forest environment tax [national tax] 1,000 yen) as a guide (this varies slightly by local government)[MIC (in Japanese)].
From fiscal 2024 (Reiwa 6), a forest environment tax (national tax) of 1,000 yen is collected together with the per-capita levy of resident tax. As a replacement for the former special reconstruction tax (1,000 yen a year, which ended in FY2023), the burden equivalent to the per-capita levy is roughly unchanged[Ministry of the Environment (in Japanese)].
The key point: "previous year's income, next year's taxation"
The biggest feature of resident tax is that it is levied in the following fiscal year (June to the following May) based on the previous year's income (January to December). This contrasts with income tax, which is "levied in the same year on that year's income (withholding and year-end adjustment)."
Even if you leave your job and your income becomes zero, the bill for resident tax on the previous year's high income comes the next year. In a year when your income falls due to leaving a job, going independent, or taking childcare leave, set aside funds to prepare for paying the previous year's resident tax.
How to pay | Special collection and ordinary collection
| Special collection | Ordinary collection | |
|---|---|---|
| Who | Company employees and public servants (salary earners) | Sole proprietors, pension recipients, etc. |
| How to pay | Deducted from each month's salary (12 times, June to the following May) | Paid by yourself (4 times a year: June, August, October, the following January) |
| Notice | A "tax amount decision notice" via your employer | A "tax notice and payment slip" sent to your home |
Because special collection for employees switches to the new fiscal year's tax amount from the June payment, this is why you feel "my take-home pay changed from June."
Flow of the calculation (a concrete example)
The income levy of resident tax finds taxable income in almost the same steps as income tax, multiplies by 10%, and subtracts tax credits. However, some deduction amounts, such as the basic deduction, differ from income tax (the basic deduction for resident tax is 430,000 yen, etc.).
Taxable income (resident tax) = 3.56 million yen − (social insurance premiums 750,000 yen + basic deduction 430,000 yen) = about 2.38 million yen
Income levy = 2.38 million yen × 10% = about 238,000 yen + per-capita levy 5,000 yen
→ Annual resident tax is about 243,000 yen (about 20,000 yen a month)
* In reality it varies with the adjustment credit and various deductions. This is only a rough estimate.
The line where resident tax becomes exempt
If your income is below a certain level, the income levy and per-capita levy of resident tax become exempt (the amounts are guides that differ by local government and family composition).
- Both the per-capita levy and the income levy are exempt: for a single person, when the previous year's total income is at or below a certain amount (around 1 million yen of annual salary income in many local governments), etc.
- Persons with disabilities, minors, widows/widowers, and single parents: exempt if the previous year's total income is 1.35 million yen or less
Various benefit payments to counter rising prices often target "resident-tax-exempt households," and this also affects things like childcare fees and the ceiling for high-cost medical care. For details, see also the child and childcare support levy and benefit payments to counter rising prices.
Main ways to reduce resident tax
Because the income levy of resident tax is based on the same taxable income as income tax, increasing your income deductions also reduces resident tax.
- Contributions to iDeCo (fully deductible as an income deduction)
- The medical expense deduction and the life insurance premium deduction
- Furusato Nozei (the donation amount minus 2,000 yen is deducted from the next fiscal year's resident tax)
- The blue return special deduction (for sole proprietors)
FAQ
From when and until when do I pay resident tax?
It is paid on the previous year's income from June of the following fiscal year to May of the next year. For employees, the amount deducted from the June salary switches to the new fiscal year's amount.
Why can resident tax be higher than income tax?
Income tax is progressive, so at low income the rate is 5%, but the income levy of resident tax is a flat 10%. As a result, the smaller a person's taxable income, the more likely they are to feel that "resident tax is higher."
What happens to resident tax if I leave my job?
You still need to pay resident tax on the previous year's income after leaving. Either the remaining amount is collected in a lump sum when you leave, or it switches to ordinary collection and you pay it yourself. Prepare funds especially in a year when your income falls.
Do Furusato Nozei and iDeCo reduce resident tax?
Yes. iDeCo contributions are fully deductible as an income deduction, and for Furusato Nozei the donation amount minus 2,000 yen is deducted from the next fiscal year's resident tax.
Summary
Reference links (sources)
This article is based on materials from the following public bodies (neutral, primary sources). Tax rates, the per-capita levy, and exemption criteria may differ by local government and fiscal year, so please confirm with your own municipality.
- Ministry of Internal Affairs and Communications — Individual resident tax (in Japanese)
- Ministry of Internal Affairs and Communications — Overview of individual resident tax (rates and per-capita levy) (in Japanese)
- Ministry of the Environment — Forest environment tax and forest environment transfer tax (in Japanese)
* This article is general information, not tax advice. For specific tax amounts and exemption determinations, please confirm with your municipality or a tax accountant.