This is a translation of the Japanese original. The Japanese version is authoritative; figures follow Japanese tax law.
The period over which gifts you received from a parent are added back into the estate (the add-back of lifetime gifts, 生前贈与加算) after that parent dies is getting longer. For gifts made from January 2024 onwards, the add-back covers the seven years before death instead of the three years before death. It does not jump to seven years at once, though. An inheritance that opens during 2026 is still three years, the period stretches gradually from 2027, and it reaches the full seven years in 2031. This article shows in a calendar how many years are added back depending on when the person dies, and sorts out the 1 million yen deduction that comes with the extended part, why gifts to grandchildren fall outside the rule, and how to choose between the two gift tax systems, using National Tax Agency (NTA) materials.
The short answer: the period added back depends on the year of death
| Date of death | Gifts added back into the estate | Actual length |
|---|---|---|
| Up to 31 December 2026 | Gifts within the three years before death | 3 years |
| 1 January 2027 to 31 December 2030 | Gifts from 1 January 2024 to the date of death | Over 3 years but under 7 (it depends on the date of death) |
| 1 January 2031 onwards | Gifts within the seven years before death | 7 years |
Source: National Tax Agency, Tax Answer No.4161 "Adding gifted property back and the tax credit (annual gift taxation)" [NTA]
The point is that the starting date of the transitional rule is fixed at 1 January 2024. Gifts made in 2023 or earlier are never added back, whenever the inheritance opens, as long as they fall outside the three years before death. If the person dies in June 2028, for example, what comes back is roughly four and a half years of gifts, from 1 January 2024 to June 2028.
Year-by-year calendar: how many years come back if death falls in this year
| Year of death | Period of gifts added back | Rough length |
|---|---|---|
| 2026 | From 2023 to the same date in 2026 | 3 years |
| 2027 | From 1 January 2024 | 3 to 4 years |
| 2028 | From 1 January 2024 | 4 to 5 years |
| 2029 | From 1 January 2024 | 5 to 6 years |
| 2030 | From 1 January 2024 | 6 to 7 years |
| 2031 onwards | Within the seven years before death | 7 years |
"Within three years" is counted from the same day three years before the date of death. If the person dies on 1 October 2026, gifts made on or after 1 October 2023 are covered.
The extended part comes with a 1 million yen deduction
There is some relief for the part that stretched from three years to seven. In the NTA's wording, where the inheritance opens on or after 2 January 2027, property in the add-back period other than property acquired within the three years before death is added back only above a total of 1 million yen, measured on the value at the time of the gift[NTA No.4161].
- Gifts within the three years before death: 1.1 million yen x 3 years = 3.3 million yen, added back in full
- Gifts four to seven years before death: 1.1 million yen x 4 years = 4.4 million yen, less 1 million yen, so 3.4 million yen is added back
- Total: 6.7 million yen returns to the estate (of 7.7 million yen in gifts, only 1 million yen stays out)
The 1 million yen is not "per year": it is 1 million yen for the whole four-year block. As a deduction it is small, and it does not cancel out the effect of the extension. What is added back is also the value at the time of the gift. Shares or land that have risen in price come back at the valuation on the day they were given.
Whose gifts come back: only those of people who inherit
The add-back applies to gifts made to a person who acquires property by inheritance or bequest[NTA No.4161]. Gifts to a grandchild who is not an heir, or to a child's spouse, are not added back as long as that person receives nothing in the inheritance. That is why people say "gifts to grandchildren escape the seven-year add-back".
Not added back
- A gift to a grandchild who is not an heir, where the grandchild receives nothing under a will and no insurance money
- A gift to a child's spouse who likewise receives nothing in the inheritance
- Gifts made on or before 31 December 2023 that fall outside the three years before death
- Amounts covered by the exemption for home acquisition funds or the exemption for education funds
Added back (easy to miss)
- The grandchild receives property under a will or is the beneficiary of a life insurance policy
- The grandchild has been adopted, and so becomes an heir
- Annual-taxation gifts to someone who has elected the settlement-at-inheritance system (gifts under that system are added back separately)
- Gifts of 1.1 million yen or less on which no gift tax was due, and gifts made in the year of death
Where a gift on which you paid gift tax is added back, that gift tax is credited against the inheritance tax, so there is no double taxation. Penalty tax and delinquent tax, however, cannot be credited.
The 1.1 million yen under the settlement-at-inheritance system does not come back
From 2024 the settlement-at-inheritance system (相続時精算課税) also has a basic deduction of 1.1 million yen a year. Gifts within that 1.1 million yen are never added back into the estate[NTA No.4103]. Under annual gift taxation (暦年課税), seven years of the 1.1 million yen come back; under the settlement system, it never comes back however long ago it was given. That is the difference that changed how the two systems compare.
| Annual gift taxation | Settlement at inheritance | |
|---|---|---|
| Tax-free allowance each year | 1.1 million yen | 1.1 million yen (from 2024) |
| Add-back of gifts within the allowance | Seven years before death come back (transitional rule applies) | Never come back |
| The part above 1.1 million yen | Progressive rates of 10 to 55% | Tax-free up to 25 million yen cumulatively, then 20%. Added back at inheritance |
| Electing it | This applies if you do nothing | A filing is required. Once elected, you cannot go back |
| Small-scale residential land relief (小規模宅地等の特例) | Available on land acquired by inheritance | Not available on land given under the settlement system |
If an elderly parent wants to hand over 1.1 million yen a year with the tax certainty that it stays out of the estate, electing the settlement system and giving 1.1 million yen at a time is a strong option. If a younger parent will be giving over twenty years or more, annual taxation is not necessarily worse, because anything beyond seven years stays out anyway. For a fuller comparison, see how to choose between annual gift taxation and settlement at inheritance. For the tax-free allowance in general, see the 1.1 million yen gift tax allowance.
What you can do now
- Keep records of the gifts. It is the recipient who has to prove a gift made seven years ago. Keep the gift agreement and the bank transfer record, filed by year.
- Review who receives the gifts. Gifts to a grandchild or a child's spouse who receives nothing in the inheritance are not added back. Naming a grandchild as an insurance beneficiary, however, brings them back into scope.
- Consider electing the settlement system. The election form is filed between 1 February and 15 March of the year after the gift. Miss the deadline and that year stays under annual taxation.
- Check first whether inheritance tax applies at all. If the estate fits inside the basic deduction (30 million yen plus 6 million yen per statutory heir), the tax is zero even after the add-back. You can check the ballpark in the inheritance tax basic deduction and how to reduce the bill.
Frequently asked questions
My parent died in 2026. How many years come back?
Three years. For an inheritance that opens up to 31 December 2026, only gifts within the three years before death are added back, as before the reform. Seven years apply from inheritances in 2031 onwards.
Do years of 1.1 million yen or less, on which no gift tax was paid, also come back?
Yes. Gifts inside the add-back period are added back whether or not gift tax was due. The same goes for gifts received in the year of death.
Is the 1 million yen deduction 1 million yen every year?
No. It is 1 million yen in total for gifts in the period outside the three years before death. Think of it as 1 million yen across four years.
Do gifts to a grandchild really never come back?
Only where the grandchild receives nothing by inheritance or bequest. If the grandchild is the beneficiary of a life insurance policy, receives property under a will, or has been adopted, they count as a person who acquired property, and the add-back applies.
Reference links (sources)
- NTA No.4161 Adding gifted property back and the tax credit (annual gift taxation) (the table of add-back periods, the 1 million yen deduction, who is covered)
- NTA No.4103 Electing settlement at inheritance (the 1.1 million yen basic deduction, the filing deadline, the fact that you cannot return to annual taxation)
- NTA No.4152 Calculating inheritance tax (working out the taxable estate after the add-back)
- NTA No.4124 Small-scale residential land relief (the relief is unavailable on land given under the settlement system)
Note: the calculation in this article applies the NTA's tables and add-back rules ourselves; it is not a worked example published by the NTA. For an individual decision, check with a tax accountant or your tax office.
