Year-End Tax Adjustment Refund: When It Lands, and How Much

This is a translation of the Japanese original. The Japanese version is authoritative; figures follow Japanese tax law.

A year-end tax adjustment refund is, as a rule, added to your December pay (or to the bonus, if the bonus comes first). The amount is the gap between the income tax withheld month by month and the correct tax for the whole year. It depends on which deductions you claim and on your tax rate. At a 10% rate (annual income of roughly 4.5 to 6 million yen), the 120,000 yen cap on the life insurance premium deduction returns about 12,000 yen, iDeCo contributions of 23,000 yen a month return about 28,000 yen, and the second year of a mortgage tax credit on a 30 million yen balance returns 210,000 yen. 2026 (the Reiwa 8 tax year) is the year in which the increase in the basic deduction is settled all at once in the December year-end adjustment, so on the same income you get back about 28,000 yen more than in a normal year at 5 million yen of annual income, and about 37,000 yen more at 6 million yen. This article sorts out when the money arrives, how much it is, where to check it, why it can be small, and when you face additional withholding instead, using National Tax Agency (NTA) materials.

The short answer: it comes back with your December pay. Rough refunds by deduction (for someone on a 10% rate)

Deduction reflected in the year-end adjustment	Deduction amount	Rough income tax refund (10% rate)	How much next year's resident tax also falls
The 2026 increase in the basic deduction (everyone, automatic)	880,000 yen to 1,040,000 yen, and so on	Annual income 4 million yen: about 8,200 yen / 5 million yen: about 28,000 yen / 5.5 to 6.5 million yen: about 37,000 yen	Resident tax does not change
Life insurance premium deduction (at the cap)	120,000 yen	About 12,000 yen	7,000 yen
Earthquake insurance premium deduction (at the cap)	50,000 yen	About 5,100 yen	2,500 yen
iDeCo (deduction for small business mutual aid and iDeCo contributions) at 23,000 yen a month	276,000 yen	About 28,000 yen	27,600 yen
One more dependent relative during the year (aged 16 or over)	380,000 yen	About 39,000 yen	33,000 yen
A university-age child (specified dependent, 19 to 22)	630,000 yen	About 64,000 yen	45,000 yen
Mortgage tax credit, second year onwards (year-end balance of 30 million yen)	Tax credit of 210,000 yen	Up to 210,000 yen (what cannot be used comes off next year's resident tax, up to 97,500 yen)	—
Your bonuses for the year were small, or you joined mid-year	—	Whatever extra was taken out month by month	—

Note: income tax is calculated at a rate of 10.21%, including the special reconstruction income tax. At a 5% rate the figures are roughly half, at 20% roughly double. A dependent relative you listed on the declaration for dependent deductions from the start of the year is already reflected in the monthly withholding, so it does not come back as a year-end refund.

The NTA states that "the year-end adjustment is to be carried out when salary is paid for the last time in the year, so it is normally done in December", and that an overpaid amount is "deducted from the withholding tax for the month in which the year-end adjustment was made, and refunded to the person who overpaid"[NTA, How to carry out the year-end adjustment for Reiwa 8 (2026)]. A company that pays a bonus before salary in December is allowed to do the year-end adjustment with the bonus. Some payroll schedules put it on the January salary of the following year, but the withholding slip (源泉徴収票) is issued by 31 January of the following year[NTA No.7411].

Why money comes back: monthly withholding is designed to be on the high side, and deductions only work at year-end

The NTA gives three reasons why the monthly withholding and the annual tax do not match[How to carry out the year-end adjustment, p.5].

The withholding tax table is built on the assumption that your monthly salary is the same all year. In reality overtime and bonuses move it around, so a gap appears. In a year when bonuses were small, too much was taken out and the refund is larger.
When dependent relatives change during the year, only the pay after the change is corrected; it is not applied retroactively. A child born, or a parent added as a dependent, is settled together in the year-end adjustment.
Deductions such as life insurance and earthquake insurance premiums are granted at the time of the year-end adjustment. The same goes for iDeCo, small business mutual aid, and National Pension contributions you paid yourself (the social insurance premium deduction): not a single yen of them is reflected until year-end.

There is also a circumstance specific to 2026. The increase in the basic deduction in the Reiwa 8 tax reform (to 1,040,000 yen and so on) and the 740,000 yen employment income deduction take effect on 1 December, so the withholding up to November still followed the pre-reform tax table. The NTA says that "in this year's year-end adjustment, the annual tax is calculated under the amendments including the increase in the basic deduction, and the tax withheld under the pre-amendment withholding tax tables is settled as well". The figures by income level are sorted out in the 1.04 million yen basic deduction runs through the 2027 tax year.

Who has extra taken out instead: fewer dependents, larger bonuses, or Column B withholding

If the annual tax is the larger figure, the difference is collected from your December pay. The case the NTA spells out is that "where the number of dependent relatives eligible for the deduction falls after the year-end adjustment, it is redone and the shortfall is collected". The typical year is one in which a child started working, or a spouse's income rose and they left your dependents[NTA No.2671]. As the mirror image of the NTA's list of situations that produce an overpaid amount, a year in which bonuses made up a large share of your pay also tends to end in additional withholding. If taking the whole shortfall out of December pay would leave someone with less than 70% of their average take-home pay, the company can apply to the tax office and collect it in instalments in January and February of the following year.

Case	The December settlement	Why
A child started working and left your dependents (declared as a dependent at the start of the year)	Additional withholding	Month by month, less was taken out because it counted one dependent
Your spouse's annual income went over 1.36 million yen	Additional withholding	Settling the amount withheld while they counted as a spouse eligible for the withholding deduction
Your bonuses were larger than usual	Likely additional withholding	The rate on a bonus is set from the previous month's salary, and can be lower than the rate on your annual income
You got a pay rise during the year	Little difference, or slightly more taken out	The tax table responds immediately to the higher salary
You joined mid-year and handed in the withholding slip from your previous job	A larger refund	The full year's deductions are available (they are not pro-rated by month)

Where to check: the year-end adjustment balance line on your payslip, and how to read the withholding slip

Your December (or January) payslip carries a line such as "year-end adjustment refund", "year-end adjustment balance" or "year-end settlement", with a plus figure. A minus figure means additional withholding.
The "withholding tax" figure on your withholding slip (源泉徴収票) is the annual tax after the refund, so the refund itself is not written there. Add up the income tax on your payslips from January to November and compare it with the income tax on the December payslip (after the refund): the difference is the refund.
When the refund is smaller than you expected, the cause is usually one of three: you forgot to attach the certificate to the insurance premium deduction form; you did not hand in the iDeCo deduction certificate (it arrives around October each year); or you left a dependent relative off the form. Up to the issue of the withholding slip at the end of January, your company can recalculate, and even after that you have five years to get the money back by filing a tax return (a refund claim)[NTA No.2030].

How to fill in the year-end adjustment forms is covered in our guide to the year-end adjustment paperwork, the four figures on the withholding slip in how to read your withholding slip, and the deduction lines on your payslip in how to read your payslip.

Deductions the year-end adjustment cannot return: medical expenses, Furusato Nozei and the first year of the mortgage tax credit need a tax return

The year-end adjustment forms have no box for the deductions below, so they are available only through a tax return. The NTA lists them among its examples of refund claims[NTA No.2030].

Deduction	Year-end adjustment	What to do
Medical expense deduction and the self-medication scheme	Not available	A tax return the following year (how to calculate the medical expense deduction)
Donation deduction (Furusato Nozei)	Not available	The one-stop exception, or a tax return. Filing a tax return voids the one-stop exception (a tax return voids every one-stop exception)
The first year of the mortgage tax credit	Not available	A tax return for the first year only, then the year-end adjustment from the second year (guide to the mortgage tax credit)
Casualty loss deduction (disaster or theft)	Not available	A tax return (the casualty loss deduction and the Disaster Tax Relief Act)
Deduction for specific expenditures of an employee	Not available	A tax return
You left your job during the year and had no year-end adjustment	—	A refund claim, from January of the following year and for five years (refund claims for people who left work mid-year)

People the year-end adjustment does not cover at all (income above 20 million yen, Column B withholding, leaving a job during the year and so on) are collected in who does not get a year-end adjustment.

Frequently asked questions

Is the refund taxed? Does it affect my resident tax?

The refund is simply tax you overpaid coming back, so it is not taxed. The income deductions settled in the year-end adjustment are also reflected in the resident tax from June of the following year: with the life insurance premium deduction, the 70,000 yen resident tax cap at 10% means 7,000 yen less. Note that the 2026 increase in the basic deduction applies to income tax only; the basic deduction for resident tax stays at 430,000 yen.

My iDeCo deduction certificate did not arrive in time for the year-end adjustment.

If you joined in October or later, the certificate may not reach you in time. If your company will recalculate by the end of January, that settles it. If not, claim it in your tax return in February or March as a deduction for small business mutual aid and iDeCo contributions, and the same amount comes back.

Summary

Refunds are, in principle, added to December's salary (or to the bonus if the bonus comes first).
In 2026, the increase in the basic deduction is reconciled through year-end adjustment, resulting in roughly ¥28,000 more in refunds for an annual income of ¥5 million, and about ¥37,000 more for ¥6 million.
For someone in the 10% tax bracket, maxing out the life insurance premium deduction yields about ¥12,000 back, and contributing ¥23,000 a month to iDeCo yields about ¥28,000 back.
Years when dependents decreased or bonuses were higher tend to result in additional tax owed instead of a refund. Check the year-end adjustment over/underpayment line on the December pay slip.
The first year of the medical expense deduction, furusato nozei, and the home loan deduction is not reconciled through year-end adjustment; a final tax return is required.

Reference links (sources)

This article is based on the materials below. The refund figures are estimates based on tax rate brackets.

Note: this article is general information. Your actual refund depends on your own deductions, your tax rate and your company's payroll calculation.