This is a translation of the Japanese original. The Japanese version is authoritative; figures follow Japanese tax law.
You may have heard that "the basic deduction is now 1.04 million yen" and assumed it will still be there next year and the year after. The basic deduction set by the FY2026 (Reiwa 8) tax reform works by adding an "add-on" to a base amount of 620,000 yen, and that add-on applies only to the 2026 and 2027 tax years (Reiwa 8 and Reiwa 9). The 420,000 yen add-on that currently helps employees earning roughly 6.65 million yen a year or less disappears from the 2028 tax year (Reiwa 10) as the law stands, leaving a basic deduction of 620,000 yen, which works out to an income tax increase of 21,000 to 43,000 yen a year for people earning 2.5 million to 6.65 million yen. In the near term, though, this is a tax cut: the year-end tax adjustment in December 2026 refunds more than last year, and from January 2027 the monthly withholding falls. Using National Tax Agency and Ministry of Finance materials, we sort out what changes in each tax year, and by how much, broken down by income level.
The short answer: the basic deduction is 620,000 yen plus an add-on, and the add-on ends with the 2027 tax year
The National Tax Agency's "Outline of the April 2026 Revision of Withholding Income Tax" sets out the basic deduction as follows[NTA Outline]. The base amount under the permanent rule is 620,000 yen (580,000 yen before the reform), and on top of it comes an add-on under the Act on Special Measures Concerning Taxation that differs by tax year.
| Total income (rough annual salary if salary is your only income) | 2025 tax year (Reiwa 7) | 2026 and 2027 tax years (Reiwa 8 and 9) | 2028 tax year onward (Reiwa 10 onward) |
|---|---|---|---|
| 1,320,000 yen or less (salary of about 2,060,000 yen or less) | 950,000 yen | 1,040,000 yen (620,000 + 420,000) | 990,000 yen (620,000 + 370,000) |
| Over 1,320,000 up to 3,360,000 yen (salary of about 2,060,000 to 4,750,000 yen) | 880,000 yen | 1,040,000 yen (620,000 + 420,000) | 620,000 yen |
| Over 3,360,000 up to 4,890,000 yen (salary of about 4,750,000 to 6,650,000 yen) | 680,000 yen | 1,040,000 yen (620,000 + 420,000) | 620,000 yen |
| Over 4,890,000 up to 6,550,000 yen (salary of about 6,650,000 to 8,500,000 yen) | 630,000 yen | 670,000 yen (620,000 + 50,000) | 620,000 yen |
| Over 6,550,000 up to 23,500,000 yen | 580,000 yen | 620,000 yen | 620,000 yen |
Alongside this, the minimum guaranteed amount of the employment income deduction is also raised: the permanent rule sets it at 690,000 yen, and for "Reiwa 8 and Reiwa 9" only, 50,000 yen is added on to make it 740,000 yen[MOF FY2026 Tax Reform Outline]. This too returns to 690,000 yen from the 2028 tax year. In other words, 2028 brings both people whose basic deduction add-on shrinks and people whose employment income deduction shrinks by 50,000 yen (those earning 1.9 million yen or less).
The salary figures in the table assume that salary is your only income and use the employment income deduction for the 2026 and 2027 tax years (a minimum of 740,000 yen). Total income of 4,890,000 yen corresponds to a salary of about 6,650,000 yen, and 6,550,000 yen to a salary of about 8,500,000 yen. If you have income other than salary, such as a side business or a pension, judge on the total income side.
The December 2026 year-end tax adjustment: a bigger refund than last year, about 37,000 yen at a salary of 5.5 to 6.5 million yen
This year's reform (the 2026 tax year) is applied all at once in the year-end tax adjustment in December. The National Tax Agency states that "there is no change to withholding operations for salaries and the like up to November 2026" and that "in the year-end tax adjustment carried out in December 2026, the tax for the year is calculated on the basis of the raised basic deduction and settled against the withheld tax calculated using the pre-reform 'withholding tax table'"[NTA Outline]. Because the monthly withholding still follows the pre-reform table, the increase in the deduction feeds straight through into a larger December refund.
If your income is the same as last year (the 2025 tax year), the amount refunded in the year-end tax adjustment goes up by roughly the following differences.
| Annual salary (salary only) | Basic deduction | Income tax, 2025 tax year | Income tax, 2026 tax year | Extra refund vs. last year (rough) |
|---|---|---|---|---|
| 2,000,000 yen | 950,000 → 1,040,000 yen | 3,500 yen | 0 yen | about 3,500 yen |
| 3,000,000 yen | 880,000 → 1,040,000 yen | 35,200 yen | 27,000 yen | about 8,200 yen |
| 4,000,000 yen | 880,000 → 1,040,000 yen | 65,300 yen | 57,100 yen | about 8,200 yen |
| 4,500,000 yen | 880,000 → 1,040,000 yen | 81,900 yen | 73,700 yen | about 8,200 yen |
| 5,000,000 yen | 680,000 → 1,040,000 yen | 117,900 yen | 90,300 yen | about 27,600 yen |
| 5,500,000 yen | 680,000 → 1,040,000 yen | 151,100 yen | 114,300 yen | about 36,800 yen |
| 6,000,000 yen | 680,000 → 1,040,000 yen | 184,200 yen | 147,500 yen | about 36,700 yen |
| 6,500,000 yen | 680,000 → 1,040,000 yen | 217,400 yen | 180,700 yen | about 36,700 yen |
| 7,000,000 yen | 630,000 → 670,000 yen | 282,300 yen | 274,100 yen | about 8,200 yen |
| 8,000,000 yen | 630,000 → 670,000 yen | 435,400 yen | 427,200 yen | about 8,200 yen |
| 10,000,000 yen | 580,000 → 620,000 yen | 782,500 yen | 774,400 yen | about 8,100 yen |
Note: calculated for a single person, with social insurance premiums at 15% of annual salary, only the social insurance premium deduction and the basic deduction taken as income deductions, and the special income tax for reconstruction included. The gap is smaller for people with a dependent deduction or a life insurance premium deduction, and for those whose tax is already zero because of the housing loan tax credit. The basic deduction for resident tax stays at 430,000 yen, so there is no effect on resident tax.
The biggest gap is for the band earning 4.75 million to 6.65 million yen. Their basic deduction was 680,000 yen in the 2025 tax year and is now 1,040,000 yen, an increase of 360,000 yen; as they sit in the 10% tax bracket, close to 37,000 yen a year comes back. The 2.5 million to 4.75 million yen band gains 160,000 yen (880,000 → 1,040,000 yen), or about 8,200 yen. People earning more than 8.5 million yen also see the base amount rise by 40,000 yen, so at a 20% rate about 8,000 yen comes back.
From January 2027: the monthly withholding falls (the withholding tax table is revised)
For salaries paid on or after January 1, 2027, withholding follows the "Reiwa 9 (2027) withholding tax table", which builds in the post-reform deduction amounts[NTA Q&A]. The basic deduction for the 2027 tax year is the same as for 2026 (1,040,000 yen, or 670,000 or 620,000 yen), so the annual tax does not change; what changes is that instead of coming back in a lump in December, it is returned bit by bit in each month's take-home pay. As a rough guide, divide the "extra refund" in the table above by 12.
Salary of 3 million to 4.5 million yen: about 8,200 yen divided by 12 = about 700 yen a month
Salary of 5 million yen: about 27,600 yen divided by 12 = about 2,300 yen a month
Salary of 5.5 million to 6.5 million yen: about 36,800 yen divided by 12 = about 3,100 yen a month
By the same token, the refund from the year-end tax adjustment in December 2027 returns to a normal level. If the 2027 year-end adjustment feels smaller than last year's, it is because you were receiving the money month by month all along.
The same logic applies to people receiving a pension: in withholding on public pensions the basic deduction amount is raised from the payment for January 2027, and the 2026 tax year is settled at the December pension payment[NTA Outline]. The whole picture of tax on pensions is set out in tax on pensions and filing a return.
The 2028 cliff: the basic deduction falls by 420,000 yen for salaries of 2.5 million to 6.65 million yen
The Ministry of Finance's outline sets the add-on to the basic deduction at 420,000 yen for total income of 4,890,000 yen or less and 50,000 yen above that (up to 6,550,000 yen) for "the 2026 and 2027 tax years", and for "each tax year from 2028 onward" at 370,000 yen limited to total income of 1,320,000 yen or less[MOF Outline, p.4]. People earning about 2.06 million yen or less keep 990,000 yen, but people earning about 2.06 million to 6.65 million yen go from 1,040,000 yen to 620,000 yen, a cut of 420,000 yen. The 50,000 yen add-on to the employment income deduction ends at the same time.
| Annual salary (salary only) | Basic deduction, 2027 → 2028 tax year | Income tax for 2028 (at the same income) | Difference from 2027 |
|---|---|---|---|
| 2,000,000 yen | 1,040,000 → 990,000 yen (employment income deduction also 740,000 → 690,000 yen) | 1,000 yen | +1,000 yen |
| 2,500,000 yen | 1,040,000 → 620,000 yen | 34,400 yen | +21,400 yen |
| 3,000,000 yen | 1,040,000 → 620,000 yen | 48,400 yen | +21,400 yen |
| 4,000,000 yen | 1,040,000 → 620,000 yen | 78,600 yen | +21,500 yen |
| 5,000,000 yen | 1,040,000 → 620,000 yen | 124,000 yen | +33,700 yen |
| 6,000,000 yen | 1,040,000 → 620,000 yen | 190,400 yen | +42,900 yen |
| 6,500,000 yen | 1,040,000 → 620,000 yen | 223,500 yen | +42,800 yen |
| 7,000,000 yen | 670,000 → 620,000 yen | 284,300 yen | +10,200 yen |
| 8,000,000 yen | 670,000 → 620,000 yen | 437,400 yen | +10,200 yen |
| 10,000,000 yen | 620,000 → 620,000 yen | 774,400 yen | 0 yen |
The 2028 tax increase is concentrated on workers earning 2.5 million to 6.65 million yen and has no effect on people earning more than 8.5 million yen. The add-on was put in place for two years only, as a "response to rising prices", and the outline also sets out a mechanism for reviewing the base amount of the basic deduction (620,000 yen) every two years in line with the rate of increase in the consumer price index[MOF Outline, p.2]. That review, however, applies only to the base amount: the 420,000 yen add-on will not come back through price indexation. Changing the treatment for 2028 would require a decision in the FY2028 (Reiwa 10) tax reform, settled at the end of 2027. We will add to this article if anything moves.
The 2026 and 2027 tax years are two years in which the same income leaves you with more take-home pay than last year. Rather than simply spending the difference, keep in mind the tax that comes back in 2028 (about 34,000 yen at a salary of 5 million yen, about 43,000 yen at 6 million yen); then you will not be caught out by a smaller refund at the 2028 year-end tax adjustment. Ways of increasing your income deductions, such as iDeCo or the Small Enterprise Mutual Aid, work best for people on higher tax rates.
What happens to the dependency and spousal thresholds
The income requirement for dependent relatives and for a spouse in the same household has been raised from the 2026 tax year to total income of 620,000 yen or less (a salary of 1.36 million yen or less). That test uses the base amount of 620,000 yen and the employment income deduction of 740,000 yen, so in 2028, with the 50,000 yen add-on to the employment income deduction gone, it falls to 1.31 million yen. The special spousal deduction is paid in full up to a salary of 1.59 million yen, the special deduction for specified relatives runs up to a salary of 1.97 million yen, and the working student deduction up to a salary of 1.63 million yen; all of these are the figures for the 2026 and 2027 tax years[NTA Outline]. The thresholds are set out one by one in from the 1.03 million yen threshold to the 1.23 million yen threshold, and dependency for student children in student part-time work and a parent's dependency claim.
Note that dependency for social insurance (1.3 million yen) runs on a different standard from tax; for what changes from October 2026, see staying a dependent after temporarily going over 1.3 million yen.
Frequently asked questions
Can sole proprietors and freelancers also use the 1.04 million yen basic deduction?
Yes. The basic deduction applies whatever the type of income: if your total income is 4,890,000 yen or less, it is 1,040,000 yen for the 2026 and 2027 tax years. It shows up from the tax return filed in February and March 2027 (for the 2026 tax year). The 740,000 yen employment income deduction is only for people with salary income and has nothing to do with business income.
Does the basic deduction for resident tax go up too?
The basic deduction for resident tax stays at 430,000 yen. This reform covers income tax only; for resident tax, the only change is that the minimum guaranteed amount of the employment income deduction rises to 690,000 yen (740,000 yen for the FY2027 and FY2028 levies). It makes a small difference for people earning 1.9 million yen or less, but resident tax does not change for anyone above that.
Will my take-home pay really rise from January 2027?
The annual income tax is the same as for the 2026 tax year, but from January 2027 withholding uses a tax table that builds in the post-reform deductions, so your monthly take-home pay is higher than in the same month last year. In exchange, the refund at the December 2027 year-end tax adjustment is smaller than in December 2026.
Is it settled that the basic deduction returns to 620,000 yen in 2028?
The FY2026 tax reform outline and the amending legislation provide that, from the 2028 tax year onward, the add-on is only the 370,000 yen for total income of 1,320,000 yen or less, so that is the position in law. It is still possible that an extension or a revision will be debated in the FY2028 tax reform at the end of 2027. What is settled at this point is that the basic deduction for people earning about 2.06 million to 6.65 million yen becomes 620,000 yen from the 2028 tax year.
Reference links (sources)
This article is based on the materials below. The calculations are rough guides based on fixed assumptions; your actual tax depends on your own deductions.
Note: this article is general information. For the individual calculation in your year-end tax adjustment or tax return, check with your employer, the tax office or a tax accountant.
