This is a translation of the Japanese original. The Japanese version is authoritative; figures follow Japanese tax law.
Claiming the housing loan tax credit (住宅ローン控除) does not lower your furusato nozei (ふるさと納税) ceiling. The ceiling is set by "20% of the income-based portion of resident tax", and that 20% is calculated before the housing loan credit is taken off[Local Tax Act, Art. 37-2 (in Japanese)]. With the one-stop exception (ワンストップ特例), the whole furusato deduction is handled on the resident tax side and does not collide with the housing loan credit.
A loss appears only in a year when you file a tax return. It hits people whose housing loan credit cannot be used up against income tax and who also reach the resident tax cap of ¥97,500. On a salary of ¥6 million, a ¥35 million loan balance and a ¥70,000 donation, filing a return raises the out-of-pocket cost from ¥2,000 to ¥8,942.
The short answer: no effect with the one-stop exception; a loss only in some filing years
| Your situation | Furusato ceiling | Out-of-pocket cost |
|---|---|---|
| Year 2 onward, year-end adjustment only (one-stop exception) | Not lowered | ¥2,000 |
| Filing year, income tax larger than the housing loan credit | Not lowered | ¥2,000 |
| Filing year, unused credit fits within the resident tax cap | Not lowered | ¥2,000 (about) |
| Filing year, unused credit exceeds the resident tax cap | Not lowered | ¥2,000 + the income tax portion (about 5-10% of the donation) |
* The income tax portion is "(donation - ¥2,000) × income tax rate × 1.021". This site's summary, including the special reconstruction income tax.
The idea that "you cannot combine the housing loan credit with furusato nozei" is a misunderstanding. You can combine them, and the ceiling stays the same. In a filing year, however, the income tax portion of the donation can end up with nowhere to go. The mechanics and figures follow.
The furusato deduction has three parts, and the resident tax special portion sets the ceiling
The deduction is split into income tax, the resident tax basic portion and the resident tax special portion. Together they return the full donation minus ¥2,000[MIC furusato nozei portal (in Japanese)].
- Income tax: (donation - ¥2,000) × income tax rate (up to 40% of total income)
- Resident tax, basic portion: (donation - ¥2,000) × 10%
- Resident tax, special portion: (donation - ¥2,000) × (90% - income tax rate), capped at 20% of the income-based resident tax
Until 2037 the income tax rate used here includes the special reconstruction income tax.
The "ceiling" is the donation at which the special portion just reaches that 20%. Anything above it is not returned, and your cost rises above ¥2,000.
Under the one-stop exception, nothing is deducted from income tax. The full amount, including that share, comes off the following year's resident tax. The conditions are:
- You are a salaried worker or similar who does not need to file a tax return
- You donate to five municipalities or fewer
- You send an application to each one (changes by 10 January of the following year)
The overall flow is in our complete guide to furusato nozei. See also the glossary entries for furusato nozei and the donation deduction.
The housing loan credit comes off income tax first; only the unused part moves to resident tax, capped at ¥97,500
The housing loan credit is taken off income tax first. Only what income tax cannot absorb is taken off the following year's resident tax[MIC, housing loan credit in resident tax (in Japanese)].
The resident tax side has a cap: 5% of the previous year's taxable income for income tax, up to ¥97,500. For homes bought at the 8% or 10% consumption tax rate and moved into from 2014 to 2021, it is 7%, up to ¥136,500.
| New home, moved in 2024-2030 | Annual credit limit | Families with children / young couples |
|---|---|---|
| Certified long-life or low-carbon home | ¥315,000 | ¥350,000 |
| ZEH-level energy-efficient home | ¥245,000 | ¥315,000 |
| Home meeting energy-saving standards (moved in 2026-2027) | ¥140,000 | ¥210,000 |
Source: National Tax Agency Tax Answer No.1211-1 (law as of 1 April 2026)[NTA (in Japanese)]. The credit is 0.7% of the year-end balance; the limit is its ceiling.
The ZEH-level limit of ¥245,000 equals a ¥35 million balance × 0.7%. If your income tax is below ¥245,000, the difference moves to resident tax. Whatever exceeds ¥97,500 there is lost.
How the credit itself is calculated is in our housing loan credit guide, and the procedure from year 2 is in the housing loan credit in the year-end adjustment.
"The housing credit lowers the ceiling" is a myth: the 20% is based on resident tax before the credit
The Local Tax Act caps the special portion at "20% of the income-based resident tax after the adjustment credit". The housing loan credit is taken off after that calculation. In other words, the size of your housing loan credit does not affect the ceiling.
Take a single person earning ¥6 million. The income-based resident tax is ¥300,500, and 20% of it is ¥60,100. The ceiling works out at about ¥77,000. The figure is the same whether the housing credit is zero or ¥245,000.
- Taxable income for resident tax: employment income ¥4.36 million - social insurance ¥900,000 - basic deduction ¥430,000 = ¥3.03 million
- Income-based resident tax: ¥3.03 million × 10% - adjustment credit ¥2,500 = ¥300,500
- Special portion cap: ¥300,500 × 20% = ¥60,100
- Donation ceiling: ¥60,100 ÷ (90% - 10.21%) + ¥2,000 = about ¥77,000
* Rough figures from this site, assuming social insurance of 15% of salary. Resident tax for fiscal 2027 (income in 2026).
The housing credit also rarely eats up the income-based resident tax itself. The credit can take at most 5% of taxable income from resident tax. The income-based resident tax is 10% of taxable income, so at least half remains.
Salary ¥6 million, balance ¥35 million, donation ¥70,000: a gap of about ¥6,900
The same ¥70,000 donation costs a different amount under the one-stop exception and under a tax return. In this example the gap is ¥6,942.
Employee, single, salary ¥6 million, social insurance ¥900,000. ZEH-level energy-efficient home moved into in 2024 or later, year-end balance ¥35 million (credit ¥245,000). Income tax for 2026.
- Work out income tax. Taxable income is ¥4.36 million - ¥900,000 - basic deduction ¥1.04 million = ¥2.42 million. Income tax is ¥2.42 million × 10% - ¥97,500 = ¥144,500.
- Apply the housing loan credit. ¥144,500 of the ¥245,000 brings income tax to zero. ¥100,500 is left unused.
- Move it to resident tax. The cap is ¥97,500 (5% of taxable income would be ¥121,000, so the lower figure applies). Even without a donation, ¥3,000 is lost.
- One-stop exception. Income tax is unchanged, and the full ¥68,000 comes off resident tax. The cost is ¥2,000.
- Tax return. The ¥68,000 donation deduction brings taxable income to ¥2,352,000 and income tax to ¥137,700. The unused credit grows to ¥107,300, and ¥9,800 is lost.
| Item | One-stop exception | Tax return |
|---|---|---|
| Income tax paid | ¥0 | ¥0 |
| Housing credit against resident tax | ¥97,500 | ¥97,500 |
| Housing credit lost | ¥3,000 | ¥9,800 |
| Donation credit against resident tax | ¥68,000 | ¥61,057 |
| Furusato out-of-pocket cost | ¥2,000 | ¥8,942 |
* Rough figures from this site applying the NTA and MIC formulas. Includes the special reconstruction income tax. Per-capita resident tax and the forest environment tax are left out.
In a tax return, the ¥6,800 income tax portion should have come back as an income tax refund. But income tax was already zero. The unused housing credit grew by exactly that amount and spilled over the cap. With the one-stop exception, the same amount comes off resident tax as the "special declaration credit" (申告特例控除).
Who loses: only when three conditions all apply
A loss appears only when all three conditions below are met. If even one is missing, your cost stays at ¥2,000.
No loss
- Year 2 onward and the year-end adjustment is enough (one-stop exception available)
- Income tax exceeds the housing credit by at least the donation's income tax portion
- Unused credit plus the income tax portion stays within ¥97,500
Loss
- You file a tax return that year (first year, medical expenses, side income)
- The housing credit is not fully used against income tax
- Unused credit plus the income tax portion exceeds the resident tax cap
We estimated the gap under a tax return for several salary and balance combinations. Each donation is the person's approximate ceiling.
| Salary | Housing loan credit | Income tax | Unused credit | Donation (ceiling) | Loss from filing |
|---|---|---|---|---|---|
| ¥5.5 million | ¥210,000 (balance ¥30 million) | ¥112,000 | ¥98,000 | ¥69,000 | ¥6,840 |
| ¥5.5 million | ¥245,000 (¥35 million) | ¥112,000 | ¥133,000 | ¥69,000 | ¥6,840 |
| ¥6 million | ¥210,000 (¥30 million) | ¥144,500 | ¥65,500 | ¥77,000 | ¥157 |
| ¥6 million | ¥245,000 (¥35 million) | ¥144,500 | ¥100,500 | ¥77,000 | ¥7,657 |
| ¥7 million | ¥245,000 (¥35 million) | ¥268,500 | ¥0 | ¥108,000 | ¥0 |
| ¥7 million | ¥315,000 (¥45 million) | ¥268,500 | ¥46,500 | ¥108,000 | ¥445 |
* Rough figures from this site: single, social insurance 15% of salary. Income tax for 2026 (basic deduction ¥1.04 million for total income up to ¥4.89 million, ¥670,000 above ¥4.89 million up to ¥6.55 million), including the special reconstruction income tax.
The loss can never exceed the income tax portion of the donation. At a 10% rate that is about a tenth of the donation; at 5%, about 5%. Gaps of a few hundred yen are rounding as the income tax portion shifts into the resident tax housing credit.
Your withholding slip (源泉徴収票) tells you where you stand. If the "housing loan credit available" (住宅借入金等特別控除可能額) is larger than the "housing loan credit" (住宅借入金等特別控除の額), the difference is your unused credit.
Filing for the medical expense deduction: the one-stop exception lapses and the income tax portion is hard to recover
Filing a tax return cancels the one-stop exception for every municipality you donated to[NTA No.1155 (in Japanese)]. That includes a return for the medical expense deduction and a resident tax declaration. All furusato donations must then be written into the return.
If your unused housing credit already exceeds the cap, you lose twice here.
- The income tax portion of the donation is not returned (about ¥6,900 in the example above)
- The medical expense deduction does nothing for income tax and is worth only the 10% resident tax share
- If you forget furusato on the return, the whole deduction disappears
In the same example (salary ¥6 million, balance ¥35 million, donation ¥70,000), not filing leaves you with a lighter tax bill if the medical expense deduction is under about ¥70,000. With a ¥30,000 deduction, filing costs ¥3,942 more; with ¥50,000, ¥1,942 more. With ¥100,000, filing saves ¥3,058.
* The medical expense deduction is "medical costs - insurance reimbursements - ¥100,000". This site's estimate; the medical expense deduction is optional, so you may choose not to claim it.
How to fix a forgotten entry is in filing a return cancels the one-stop exception, and going back up to five years is in amended returns and requests for correction.
Who needs care: the first year, large loans, and simulator results
In years without the one-stop exception, or for people close to the cap, the cost may not stay at ¥2,000.
- The first year of the housing loan credit. A tax return is required, so the one-stop exception is not available. If the unused credit exceeds the cap, the income tax portion is lost.
- Large loans with little income tax. People with a ¥315,000 or ¥350,000 credit easily exceed ¥97,500 of unused credit. In filing years, assume a loss.
- Taxable income under ¥1.95 million. The resident tax cap is 5% of taxable income, so it is below ¥97,500. The donation deduction also lowers this cap slightly.
- Ceiling simulators. Some calculators lower the ceiling when you enter a housing loan credit. That is a cautious design; under the one-stop exception the real ceiling does not fall.
Even in a loss year there is little reason to stop furusato nozei. Return gifts are limited to 30% or less of the donation. That usually outweighs the loss of the income tax portion (about a tenth of the donation). Donating right up to the ceiling does make less sense, though.
From October 2026 the rules for return gifts are being revised again. The deduction mechanics do not change. See the October 2026 furusato nozei revision.
What to do today
- On last year's withholding slip, compare the "housing loan credit available" with the "housing loan credit" to find your unused credit.
- Check whether you will file a return this year (medical costs, side income, first year). If not, keep to five municipalities or fewer and apply for the one-stop exception.
Frequently asked questions
We are a dual-income couple. In whose name should we donate?
The deduction comes off the donor's own taxes. Donating in the name of the spouse who still pays income tax, rather than the one whose income tax is zero due to the housing credit, makes it less likely that the income tax portion is wasted in a filing year. Each person's ceiling depends on their own income-based resident tax.
What should I look at on the resident tax notice to confirm the deduction worked?
The "tax credits" (税額控除額) column. Under the one-stop exception it should include, besides the resident tax housing credit, an amount close to the donation minus ¥2,000. If you filed a return, the resident tax credit is smaller by what came back through income tax.
Summary
- Even while receiving the mortgage deduction, the furusato nozei (hometown tax donation) limit does not decrease. The limit is determined by the income levy before the mortgage deduction is applied.
- With the one-stop special exemption, the entire deduction is processed through resident tax, and your out-of-pocket cost is ¥2,000.
- A loss occurs only for those who file a tax return in a year when the unused portion of the mortgage deduction exceeds the resident tax cap of ¥97,500.
- In a simulation with ¥6 million annual income, a ¥35 million loan balance, and a ¥70,000 donation, filing a tax return raises the out-of-pocket cost from ¥2,000 to ¥8,942.
- Compare the "possible special deduction amount for housing loans" and the "amount of special deduction for housing loans" on your withholding tax statement to find the unused portion.
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References (sources)
- MIC furusato nozei portal, "Tax deductions" (in Japanese) - deduction formulas, the 20% cap, the one-stop exception
- MIC, "The one-stop exception" (in Japanese) - five municipalities, 10 January
- MIC, "Housing loan credit in individual resident tax" (in Japanese) - 5% of taxable income, up to ¥97,500
- NTA Tax Answer No.1155, furusato nozei (in Japanese) - a tax return cancels the one-stop exception
- NTA Tax Answer No.1211-1, housing loan credit for 2022 onward (in Japanese) - the 0.7% rate and limits
- NTA Tax Answer No.1199, basic deduction (in Japanese) - ¥1.04 million for 2026
- MLIT, "Housing loan tax reduction" (in Japanese) - extended to moves up to 2030 by the 2026 reform
- e-Gov law search, Local Tax Act (in Japanese) - Art. 37-2 (donation credit and the cap on the special portion)
* The estimates in this article apply NTA and MIC formulas and are rough figures by this site. This article is general information. For individual decisions, consult the tax office, your municipality's resident tax section or a tax accountant.