When an earthquake or typhoon damages your home or household goods in Japan, there are two ways to reduce your income tax: the casualty loss deduction and the Disaster Relief Reduction Act. You may choose whichever is better for you — but because they work in completely different ways, the answer flips depending on your situation. This article sets out the difference and how to choose, with a calculator that compares both. The 2026 Kumamoto earthquake has been designated a specified extreme disaster, which extends the carry-forward of casualty losses from three years to five.
· Large losses and low income usually favour the casualty loss deduction, because what you cannot use this year carries forward
· If your loss is at least half the market value of the property and your income is ¥5m or less, the Disaster Relief Reduction Act wipes out your entire income tax for that year
· The 2026 Kumamoto earthquake is a specified extreme disaster (designated 7 August 2026), so casualty losses carry forward for five years instead of three
· Even after filing with one, you can switch to the other through an amended return or a claim for correction
The two rules subtract from different places
The essential difference: the casualty loss deduction reduces your income (an income deduction), while the Disaster Relief Reduction Act reduces the tax itself.
Casualty loss deduction (Income Tax Act art. 72)
An income deduction. You deduct the larger of the following two.
2. (disaster-related expenditure − insurance proceeds) − ¥50,000
- Applied before all other income deductions
- Unused amounts carry forward (3 years; 5 for a specified extreme disaster)
- No income ceiling. Theft and embezzlement also qualify (fraud and extortion do not)
- The same deduction exists for residence tax
Disaster Relief Reduction Act (art. 2)
Cuts the income tax for that year directly. Available only if both conditions are met.
· Your total income for the year of the disaster is ¥10m or less
- Income ¥5m or less → the whole income tax is waived
- ¥5m to ¥7.5m → reduced by one half
- ¥7.5m to ¥10m → reduced by one quarter
- No carry-forward. Disasters only (not theft or embezzlement)
| Point of comparison | Casualty loss deduction | Disaster Relief Reduction Act |
|---|---|---|
| How it works | Reduces income | Reduces the tax |
| Income limit | None | ¥10m or less |
| Severity required | Any | At least half the market value |
| Carry-forward | Yes (3 years; 5 for a specified extreme disaster) | No |
| Theft and embezzlement | Covered | Not covered |
| Residence tax | Reduced as well | No effect (income tax only) |
Broadly: the greater the damage and the smaller the income, the more the casualty loss deduction wins. If the damage is roughly enough to wipe out that year’s tax and your income is ¥5m or less, the Disaster Relief Reduction Act tends to win. The boundary is subtle, so run both through the calculator below.
Which is better for you
Enter four figures and the tool calculates the tax saved under each rule. For the income tax figure, use the withholding tax on your withholding slip or the tax on your return.
Note: the tool cannot test the “at least half the market value” condition for the Disaster Relief Reduction Act. Use the damage grade on your disaster victim certificate as a guide and check that yourself.
Working out the loss: the NTA’s simplified method
The biggest sticking point is putting a number on the loss. In principle you use the market value immediately before the disaster. But where the main structure of the home is damaged and calculating asset by asset is impractical, the National Tax Agency allows a simplified method[NTA].
| Asset | Formula |
|---|---|
| Home (acquisition cost known) | (acquisition cost − depreciation) × damage ratio |
| Home (acquisition cost unknown) | [(construction cost per square metre × total floor area) − depreciation] × damage ratio |
| Household goods (cost known) | (acquisition cost − depreciation) × damage ratio |
| Household goods (cost unknown) | Standard household property value by family composition × damage ratio |
| Vehicle | (acquisition cost − depreciation) × damage ratio |
The household goods route is the useful one. You do not need receipts for everything you owned: a published table gives a standard value based on the age of the head of household and the family composition, and you simply multiply it by the damage ratio. Construction cost per square metre is likewise published by region and structure type.
Depreciation is “acquisition cost × 0.9 × depreciation rate × years elapsed” (part-years of six months or more count as one year; less than six months is dropped). The damage ratio comes from the NTA’s damage ratio table, not from the grade on your disaster victim certificate.
The deduction covers assets ordinarily necessary for daily life. Business fixed assets and inventory are excluded (those become business expenses instead). So are “assets not ordinarily necessary for daily life”: holiday homes, golf club memberships, and jewellery, paintings and antiques worth over ¥300,000 per item or set.
A vehicle qualifies only where it is ordinarily necessary for daily life — used solely for commuting by you or a relative sharing your household finances, for example. A car kept purely for leisure may be excluded.
Assets owned by a spouse or relative who shares your household finances also qualify, provided that person’s total income for the year is ¥580,000 or less (from the 2025 tax year; ¥480,000 for 2020–2024).
A specified extreme disaster means five years of carry-forward
Casualty losses you cannot absorb in the year of the disaster carry forward and reduce income in later years. The normal period is three years; for a loss caused by a specified extreme disaster it becomes five.
The cabinet order designating the 2026 Kumamoto earthquake as a specified extreme disaster was promulgated and took effect on 7 August 2026; the earthquake was also designated an extreme disaster the same day. So even where the damage is far larger than one year’s income, the relief can be spread over up to five years of income tax and residence tax.
That difference matters. With a loss of ¥8m against total income of ¥3m a year, the amount you ultimately recover is materially different over five years than over three. The larger the damage, the stronger the case for the casualty loss deduction over the Disaster Relief Reduction Act.
Before you file
The certificate and the photographs
Everything starts with the disaster victim certificate issued by your municipality. Photograph the damage on your phone before you start clearing up. Demolition and removal costs count as disaster-related expenditure, so keep every receipt — you must attach or present them when you file. For the wider recovery process, see support for people affected by the Kumamoto earthquake.
Extended filing and payment deadlines
On 4 August 2026 the National Tax Agency announced an area-based extension covering Yatsushiro, Uto and Uki cities and Hikawa town in Yatsushiro district, Kumamoto Prefecture. If your tax address is there, deadlines are extended automatically. Elsewhere, if the disaster prevented you from filing on time, an extension is granted on application once things settle, filed together with the return[NTA].
Relief you can use before filing
- Suspension or refund of withholding tax: employees and public pension recipients can stop monthly withholding, or reclaim what has already been withheld, through a set procedure.
- Reducing estimated tax prepayments: sole proprietors who have received a prepayment notice can apply to reduce it. The July application is normally due 15 July and the November one 15 November, and those deadlines are also extendable.
- Housing loan tax credit: you keep the credit for the remaining years even where the home has become uninhabitable. And where the home is in a municipality covered by the Act on Support for Reconstructing Disaster-Stricken Households, you may claim the credit on both the old and a newly acquired home.
For the donor side — how relief money is treated for tax — see Kumamoto earthquake donations and the charitable deduction.
Frequently asked questions
Can I use both the casualty loss deduction and the Disaster Relief Reduction Act?
Not in the same year. You choose whichever is more advantageous. However, if you filed using the casualty loss deduction you may switch to the Disaster Relief Reduction Act when submitting an amended return or a claim for correction, and vice versa.
Do I need receipts for household goods?
No. Where the main structure of the home is damaged and asset-by-asset calculation is impractical, you may use the NTA's simplified method: multiply the standard household property value for your family composition by the damage ratio. Receipts are still required for demolition and removal costs.
Does insurance money cancel the deduction?
No. Insurance proceeds are subtracted from the loss. If they exceed the loss, the excess is subtracted from disaster-related expenditure. Payments under the Act on Support for Reconstructing Disaster-Stricken Households are not counted as insurance proceeds for this purpose.
What happens to losses I cannot use this year?
They carry forward and reduce income in later years. The normal period is three years, but for a specified extreme disaster such as the 2026 Kumamoto earthquake it is five. The casualty loss deduction is applied before all other income deductions.
I live outside Kumamoto but my parents' house was damaged. Can I claim?
Only if you own the asset, or if it is owned by a spouse or relative who shares your household finances and whose total income for the year is 580,000 yen or less. A parent in a separate household with separate finances does not qualify. The automatic deadline extension applies to people whose tax address is in Yatsushiro, Uto or Uki city or Hikawa town; elsewhere an extension is granted on application.
Sources: NTA Tax Answer No.1110 (casualty loss deduction); No.1902 (Disaster Relief Reduction Act); NTA, reasonable method of calculating losses; NTA, extension of deadlines for the 2026 Kumamoto earthquake. General information only; consult your tax office or a licensed tax accountant.