This is a translation of the Japanese original. The Japanese version is authoritative; figures follow Japanese tax law.
Income tax is not worked out by multiplying your annual income by a tax rate. It comes in three stages: annual income → employment income → taxable income → tax. For a company employee, you take the annual income, subtract the employment income deduction, then subtract income deductions such as social insurance premiums and the basic deduction. The "taxable income" that remains is taxed at one of seven rates from 5% to 45%, and the special reconstruction income tax of 2.1% is added on top. That is the income tax for one year. For 2026 (Reiwa 8) the basic deduction rose to 1.04 million yen (for total income of 4.89 million yen or less), so for a single person with social insurance premiums of 15% of pay, income tax is about 57,000 yen on an annual income of 4 million yen, about 90,000 yen at 5 million yen and about 270,000 yen at 7 million yen. This article sets out the figures by income level, the quick calculation table, a guide to how much tax a 10,000 yen deduction saves, and how resident tax differs, using National Tax Agency materials.
The short answer: income tax, resident tax and take-home pay by income level (2026, single, no dependents)
| Annual income (yen) | Employment income | Social insurance (15%) | Basic deduction | Taxable income | Rate | Income tax (incl. reconstruction tax) | Resident tax (approx.) | Take-home (approx.) |
|---|---|---|---|---|---|---|---|---|
| 2,000,000 | 1,260,000 | 300,000 | 1,040,000 | 0 | — | 0 | about 58,000 | about 1,640,000 |
| 3,000,000 | 2,020,000 | 450,000 | 1,040,000 | 530,000 | 5% | 27,000 | about 119,000 | about 2,400,000 |
| 4,000,000 | 2,760,000 | 600,000 | 1,040,000 | 1,120,000 | 5% | 57,100 | about 178,000 | about 3,160,000 |
| 5,000,000 | 3,560,000 | 750,000 | 1,040,000 | 1,770,000 | 5% | 90,300 | about 243,000 | about 3,920,000 |
| 6,000,000 | 4,360,000 | 900,000 | 1,040,000 | 2,420,000 | 10% | 147,500 | about 308,000 | about 4,640,000 |
| 7,000,000 | 5,200,000 | 1,050,000 | 670,000 | 3,480,000 | 20% | 274,100 | about 377,000 | about 5,300,000 |
| 8,000,000 | 6,100,000 | 1,200,000 | 670,000 | 4,230,000 | 20% | 427,200 | about 452,000 | about 5,920,000 |
| 10,000,000 | 8,050,000 | 1,500,000 | 620,000 | 5,930,000 | 20% | 774,400 | about 617,000 | about 7,110,000 |
| 12,000,000 | 10,050,000 | 1,700,000 | 620,000 | 7,730,000 | 23% | 1,165,800 | about 797,000 | about 8,340,000 |
| 15,000,000 | 13,050,000 | 1,850,000 | 620,000 | 10,580,000 | 33% | 1,996,400 | about 1,082,000 | about 10,070,000 |
| 20,000,000 | 18,050,000 | 2,100,000 | 620,000 | 15,330,000 | 33% | 3,596,800 | about 1,557,000 | about 12,750,000 |
All amounts are in yen. Calculated with the 2026 employment income deduction (minimum guarantee 740,000 yen) and basic deduction (1.04 million yen for total income of 4.89 million yen or less, 670,000 yen for 6.55 million yen or less, 620,000 yen for 23.5 million yen or less). Social insurance premiums are taken as 15% of annual income (the premium caps are allowed for above 11 million yen), the only income deductions are the social insurance premium deduction and the basic deduction, and resident tax is a guide figure: the 10% income-based portion (basic deduction 430,000 yen) plus a 5,000 yen per-capita portion. Anyone with dependents or insurance premium deductions pays less than this.
Someone "on a 20% rate" does not pay 20% of their taxable income. On an annual income of 7 million yen, the 270,000 yen of income tax on taxable income of 3.48 million yen is about 7.9% of taxable income and about 3.9% of annual income. That is because the "deduction" column of the quick calculation table stands for the result of applying the lower brackets step by step.
The three steps: annual income → employment income → taxable income → tax
- Subtract the employment income deduction from your annual income to get "employment income". This is the deduction that stands in for an employee's expenses. For 2026 it is 740,000 yen up to an annual income of 2.2 million yen, income × 30% + 80,000 yen up to 3.6 million yen, × 20% + 440,000 yen up to 6.6 million yen, × 10% + 1.1 million yen up to 8.5 million yen, and it is capped at 1.95 million yen above that[NTA No.1410]. On 5 million yen: 5 million × 20% + 440,000 = 1.44 million yen, so employment income is 3.56 million yen.
- Subtract your income deductions to get "taxable income" (rounded down to the nearest 1,000 yen). These are the social insurance premium deduction (the full amount paid), the basic deduction (1.04 million yen and so on), the life insurance premium deduction, the dependent deduction, iDeCo contributions and the like. On 5 million yen with 750,000 yen of social insurance premiums: 3.56 million − 750,000 − 1.04 million = 1.77 million yen.
- Read the tax off the quick calculation table and add the special reconstruction income tax of 2.1% (rounded down to the nearest 100 yen). 1.77 million × 5% = 88,500 yen, × 1.021 = 90,300 yen.
| Taxable income | Rate | Deduction | Example |
|---|---|---|---|
| 1.95 million yen or less | 5% | 0 yen | 1.5 million yen → 75,000 yen |
| Over 1.95 million up to 3.3 million yen | 10% | 97,500 yen | 2.5 million yen → 152,500 yen |
| Over 3.3 million up to 6.95 million yen | 20% | 427,500 yen | 5 million yen → 572,500 yen |
| Over 6.95 million up to 9 million yen | 23% | 636,000 yen | 7 million yen → 974,000 yen |
| Over 9 million up to 18 million yen | 33% | 1,536,000 yen | 10 million yen → 1,764,000 yen |
| Over 18 million up to 40 million yen | 40% | 2,796,000 yen | 20 million yen → 5,204,000 yen |
| Over 40 million yen | 45% | 4,796,000 yen | 50 million yen → 17,704,000 yen |
The quick calculation table is the one in National Tax Agency Tax Answer No.2260, and it is the same for 2026[NTA No.2260]. The special reconstruction income tax is 2.1% through 2026. From January 2027 it drops to 1.1% and a special defense income tax of 1% is added instead, so the total does not change (how much the special defense income tax adds).
How much tax a deduction saves: income deductions are worth your tax rate, tax credits are worth their face value
Income deductions (the life insurance premium deduction, the dependent deduction, iDeCo and so on) reduce your taxable income, so the tax you save is the deduction amount × your own tax rate. Tax credits (the mortgage tax credit, the dividend credit and so on) come straight off the tax, so the whole amount is saved.
| Deduction | Amount | On a 5% rate | On a 10% rate | On a 20% rate | On a 33% rate |
|---|---|---|---|---|---|
| An income deduction of 100,000 yen (a life insurance premium deduction, for example) | 100,000 yen | about 5,100 yen | about 10,200 yen | about 20,400 yen | about 33,700 yen |
| iDeCo at 23,000 yen a month | 276,000 yen | about 14,100 yen | about 28,200 yen | about 56,400 yen | about 93,000 yen |
| Dependent deduction (one child aged 16 or over) | 380,000 yen | about 19,400 yen | about 38,800 yen | about 77,600 yen | about 128,000 yen |
| Mortgage tax credit (a tax credit; loan balance of 30 million yen) | 210,000 yen | 210,000 yen straight off the tax (whatever income tax cannot absorb comes off resident tax, up to 97,500 yen) | |||
The same deduction is worth more to someone on a higher rate. In a dual-income household, the dependent deduction is better claimed by whichever parent has the higher rate (which parent should claim the child). For the full picture of the deductions you can use, see the 16 income deductions and who qualifies for each.
Resident tax is calculated separately: a flat 10% plus the per-capita portion, charged on last year's income from June
Resident tax (prefectural plus municipal) works from the same idea of "taxable income" as income tax, but the rate is a flat 10% (4% prefectural plus 6% municipal) and the basic deduction is still 430,000 yen. The per-capita portion is added on top (5,000 yen a year in Tokyo)[NTA: how resident tax works][Tokyo Metropolitan Bureau of Taxation]. Income tax is withheld during the same year as the income it is charged on. Resident tax is withheld in 12 instalments from June of the following year, on the previous year's income.
On an annual income of 5 million yen, income tax is about 90,000 yen while resident tax is about 240,000 yen, so resident tax is the larger of the two. That holds up to an annual income of roughly 6 million yen, because in the 5% income tax bracket the 10% resident tax weighs more. For resident tax in detail see how resident tax works and how to calculate it, and for working out take-home pay from a withholding slip see how to calculate take-home pay from your withholding slip.
Enter your annual income, dependents and premiums and you get a rough figure for income tax and resident tax with our tax calculators; the detailed simulator lets you enter dependents and each deduction in full. For a breakdown at the 10 million yen level, see tax and take-home pay on an income of 10 million yen.
Frequently asked questions
If a pay rise moves me into a higher bracket, can my take-home pay fall?
No. The rate applies only to the part of taxable income above the bracket line, which is what progressive (marginal) taxation means, so when taxable income goes from 3.3 million yen to 3.31 million yen the 20% applies only to the 10,000 yen above the line. Take-home pay falling as income rises comes from something other than the rates, such as the dependency thresholds for a spouse or the income brackets for the high-cost medical expense benefit.
Why is so much income tax taken out of a bonus?
Withholding on a bonus uses a rate based on the previous month's salary, so it can be higher than the withholding on monthly pay. The year-end adjustment settles everything against the tax due for the year, so anything overpaid comes back in December.
Does income tax change from 2027?
The basic deduction and the employment income deduction for 2027 are the same as for 2026, but from January 2027 the special reconstruction income tax falls to 1.1% and a special defense income tax of 1% is added. From 2028 the top-up to the basic deduction shrinks, and people earning 2.5 million to 6.65 million yen a year are expected to pay 20,000 to 40,000 yen more income tax a year.
How do I calculate this if I have side income?
Add the income from the side work (revenue less expenses) to your employment income to get taxable income, then use the same quick calculation table. If your salary puts you on a 10% rate, a 100,000 yen profit from side work adds about 10,000 yen of income tax and 10,000 yen of resident tax. Side income above 200,000 yen means you have to file a tax return.
Summary
- Income tax is calculated in three stages—annual income to employment income, employment income to taxable income, and taxable income to tax amount—with a 2.1% special reconstruction income tax added on top.
- For 2026, the basic deduction is ¥1.04 million (for total income of ¥4.89 million or less). For a single filer, the tax is about ¥57,000 at an annual income of ¥4 million, and about ¥90,000 at ¥5 million.
- Tax rates follow a seven-bracket progressive system from 5% to 45%. Even at a 20% marginal rate for an annual income of ¥7 million, the effective tax is only about 7.9% of taxable income.
- Income deductions reduce tax by the deduction amount multiplied by the tax rate, while tax credits like the home loan deduction reduce tax by the full deduction amount directly.
- Resident tax is a flat 10% plus a per-capita levy, based on the previous year's income and withheld starting the following June. Up to roughly ¥6 million in annual income, it exceeds income tax.
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References (sources)
This article is based on the following materials. The figures in the tables are estimates on a set of assumptions.
This article is general information. The tax you actually pay depends on your deductions, your family situation and your municipality.