This is an English translation of our Japanese article. Rules and figures may change; the Japanese version and official sources are authoritative.

Japan's FY2026 (Reiwa 8) Tax Reform: What Changes, When, and for Whom

Information as of October 24, 2026.

The outline of the FY2026 (Reiwa 8) tax reform was approved by the Cabinet on December 26, 2025, and the amending laws were enacted on March 31, 2026. Measures that started in April 2026 are already in force; the rest take effect in turn at the December 2026 year-end adjustment, in January 2027 and in January 2028. This page lists each change as "what, from when, for whom" and points you to our detailed articles.

In three lines

Employees and part-timers get an income tax cut for 2026 and 2027. The income at which income tax starts rises from ¥1.6M to ¥1.78M, and refunds at the December 2026 year-end adjustment grow. The top-up part lasts only through tax year 2027.
For sole proprietors, the invoice "20% special rule" ends with tax year 2026. For 2027 and 2028 they can switch to a rule that sets consumption tax due at 30% of output tax. From October 2026, buyers can credit only 70% (not 80%) of the tax on purchases from tax-exempt businesses.
The tax increases fund defense. A corporate tax surcharge from April 2026, a 1% income tax surcharge from January 2027, and tobacco tax from April 2027. For income tax, the special reconstruction income tax is cut by the same 1%, so the combined rate does not change.

Orange dots: in force or starting this year. Navy dots: 2027 or later. Source: Ministry of Finance "Outline of the FY2026 Tax Reform" and materials from the National Tax Agency and Cabinet Secretariat.

Changes for employees and households

Item	What changes	From when
Basic deduction and employment income deduction	The basic deduction becomes a flat ¥1.04M for total income up to ¥4.89M (¥680,000–¥950,000 in 2025). The minimum employment income deduction rises from ¥650,000 to ¥740,000. Income tax now starts at a salary of ¥1.78M instead of ¥1.6M. The ¥420,000 top-up and the extra ¥50,000 of employment income deduction last through tax year 2027. The resident tax basic deduction stays at ¥430,000.The income walls explained	Tax year 2026 settled at the December year-end adjustment Enacted, upcoming
Income limit for dependents and spouses	Dependents and spouses qualify with total income up to ¥620,000 instead of ¥580,000 (salary up to ¥1.36M instead of ¥1.23M). The special deduction for relatives aged 19–22 applies up to a salary of ¥1.97M.	December 1, 2026 Enacted, upcoming
Life insurance deduction special rule	If you have a dependent under 23, the cap for general life insurance premiums (new contracts) rises from ¥40,000 to ¥60,000. Extended by one year through tax year 2027.	Tax years 2026 and 2027 Enacted, upcoming
Meal and commuting allowances	The tax-free limit for employer meal subsidies rises from ¥3,500 to ¥7,500 a month. Car commuters get a new bracket for 65 km or more one way (up to ¥66,400 a month), and parking fees up to ¥5,000 a month are tax-free.Commuting allowance details	April 2026 In force
Mortgage tax credit	The move-in deadline is extended five years to December 31, 2030. Borrowing limits and credit periods for energy-efficient existing homes are expanded.	Move-ins from 2026 In force
Defense special income tax	Adds 1% of your income tax amount. At the same time the special reconstruction income tax falls from 2.1% to 1.1%, so the combined surtax stays at 2.1%. In exchange, the reconstruction surtax runs ten years longer, to 2047.	January 2027 Enacted, upcoming
Single-parent deduction	Rises from ¥350,000 to ¥380,000 for income tax (from ¥300,000 to ¥330,000 for resident tax).	Tax year 2027 Enacted, upcoming
Children's NISA	The tsumitate (installment) allowance opens to ages 0–17: ¥600,000 a year, with a lifetime tax-free holding limit of ¥6M.	January 2027 Enacted, upcoming
Dependent deduction for high schoolers	The proposal to cut it to ¥250,000 was shelved. It stays at ¥380,000 (¥330,000 for resident tax) through income tax for 2027 and resident tax for FY2028.	Unchanged Decided
Tax on very high incomes	Under the extra tax on extremely high incomes, the special deduction falls from ¥330M to ¥165M and the rate rises from 22.5% to 30%.	Tax year 2027 Enacted, upcoming

Not a tax reform, but from the April 2026 health insurance premium, the child and childcare support levy is added (0.23% in total for FY2026; about 0.115% paid by an employee). Look at it together with the larger refund from the basic deduction to see your net take-home change.

Changes for sole proprietors and companies

Item	What changes	From when
Invoice 20% special rule	The rule that sets consumption tax due at 20% of output tax ends with tax year 2026 for individuals and with the business year that includes September 30, 2026 for corporations. Individuals can switch to a 30% rule for 2027 and 2028 only. Corporations are not eligible.	Tax year 2027 Enacted, upcoming
Purchases from tax-exempt businesses	The creditable share of consumption tax falls from 80% to 70%; 50% from October 2028, 30% from October 2030, and none from October 2031. The annual cap per supplier drops from ¥1 billion to ¥100 million.	October 1, 2026 In force
Small depreciable assets	SMEs and sole proprietors can expense assets costing under ¥400,000 (was under ¥300,000) at once, up to ¥3M a year.	Assets acquired from April 2026 In force
Blue-return special deduction	Three tiers: ¥750,000 with both electronic books and e-Tax, ¥650,000 with e-Tax only, ¥100,000 otherwise. Paper filers drop from ¥550,000 to ¥100,000.	Tax year 2027 Enacted, upcoming
Defense special corporate tax	4% of corporate tax after subtracting ¥5M. Companies whose corporate tax is ¥5M or less pay nothing.	Business years starting April 2026 or later In force
Wage-increase tax credit	The large-company version ended on March 31, 2026. The SME version loses the training-cost bonus, so the maximum credit rate falls from 45% to 35%.	Business years starting April 2026 or later In force

Investment, gifts, cars and travel

Item	What changes	From when
Crypto assets	Gains from sales to registered domestic exchanges move from comprehensive taxation (up to about 55% with resident tax) to separate taxation at 20.315%. Overseas exchanges and person-to-person trades are excluded, and losses through 2027 cannot be carried forward.	Sales on or after January 1, 2028 Enacted, upcoming
Lump-sum gifts for education	The exemption for giving up to ¥15M to grandchildren and others was not extended, and new contracts are no longer accepted. Paying tuition when it is due has always been tax-free.	Ended March 31, 2026 In force
Car taxes	The environmental performance levy charged at purchase (0–3% of the price) is abolished. The eco-car weight tax break is extended two years with stricter criteria. Electric vehicles and similar cars face a weight tax surcharge at inspection from May 2028; the amount will be set in the December 2026 outline.	April 2026 (abolition) In force
Diesel fuel tax	The provisional rate of ¥17.1 per liter is abolished.	April 1, 2026 In force
Departure tax (International Tourist Tax)	The tax on each departure from Japan rises from ¥1,000 to ¥3,000, added to the price of air and sea tickets.	Departures from July 1, 2026 In force

A separate outline in September 2026: 1% consumption tax on food

Separately from the FY2026 reform, the Cabinet approved on September 15, 2026 an outline for a temporary cut in the consumption tax on food and a new support payment for workers. The bill was submitted to the Diet on October 9 and is under debate. Nothing is final until it passes.

Item	What changes	From when
Consumption tax on food	The reduced rate on food and drink falls from 8% to 1% for two years until March 31, 2029. Eating out and alcohol stay at 10%.What businesses need to do	April 1, 2027 Bill under debate
Worker burden relief payment	Paid once a year to low- and middle-income workers. The income lines and amounts will be set by Cabinet order and have not been announced.	FY2027 Bill under debate

Next: the FY2027 reform outline in mid-December

If the usual schedule holds, the ruling parties will compile the FY2027 (Reiwa 9) outline in mid-December 2026 and the Cabinet will approve it later that month. Four issues matter most for households and businesses:

Whether the ¥1.78M tax-free threshold continues from 2028. Under current law, the basic deduction for people earning about ¥2.06M–¥6.65M falls from ¥1.04M to ¥620,000 from tax year 2028.
The amount of the EV weight tax surcharge. The May 2028 start is fixed; only the amount is open.
The 15% corporate tax rate for SMEs (on income up to ¥8M). It expires on March 31, 2027, so an extension will be decided.
The lump-sum gift exemption for marriage and child-rearing. It is expected to end on March 31, 2027; the Children and Families Agency has requested its abolition.

Ministry requests are summarized in FY2027 tax reform requests and requests that affect households. We will update this page once the outline is decided.

How to read "In force", "Enacted" and "Bill under debate"

Tax reform moves from the outline (policy) to the enacted law and then to entry into force. On this page, In force means it already applies, Enacted, upcoming means the law fixes the start date, and Bill under debate means it is waiting for the Diet to pass it. Items still under debate can change in content or timing.

References (sources, in Japanese)

This page is general information. For your own situation, consult a tax office or a licensed tax accountant.