Housing-Loan Interest Deduction
Buy a qualifying home with a Japanese mortgage and the tax code pays you back yearly: 0.7 percent of the year-end loan balance comes off your income tax for up to 13 years. Year one runs through a tax-office filing; from year two, payroll handles it.1
Procedures, fees, and requirements can change. Confirm current details at the National Tax Agency site. This article is general information, not tax advice; for your specific case, consult a licensed tax accountant (zeirishi).
Overview
The 住宅借入金等特別控除 (jutaku kariirekin-to tokubetsu kojo, "special credit for housing loans") is a tax credit, not a deduction: it subtracts from the tax itself after the bands have run.1 Three variables decide its value for any buyer: the year-end balance, the ceiling for the property type, and the procedure for the year in question.1
What the credit pays and for how long
Each year, the credit equals 0.7 percent of the 年末残高 (nenmatsu zandaka, "year-end outstanding balance"), applied first against income tax with any capped remainder spilling to residence tax (as of 2026-09; confirm current figures with the NTA).12 Qualifying new homes earn the credit for up to 13 years; used homes earn 10 years as the standard term, with energy-graded used homes able to reach 13 years under the extended rules (as of 2026-09).13
A 2026 reform extended the move-in window to December 2030 and kept the 0.7 percent rate, with uplifts for childcare and young-couple households on qualifying homes (as of 2026-06-15; confirm the current NTA table before relying on post-2025 tiers).43
Ceilings by property type
The 借入限度額 (kariire gendogaku, "borrowing ceiling") caps the balance that earns the credit, and it varies by certification and move-in year (as of 2026-09).1 For 2022 to 2025 move-ins into new construction, the shape runs: certified long-term-superior or low-carbon homes 45,000,000 yen; ZEH-grade energy-saving homes 35,000,000 yen; other standard homes 30,000,000 down to 20,000,000 yen by year; used homes lower at a standard 20,000,000 yen (as of 2026-09; confirm current figures with the NTA).1
Reform summaries quote different ceilings for different move-in years, and a 30,000,000 yen figure from one cohort misprices another. Match your move-in year and your home's certification to the NTA tier table before estimating the credit.
Who qualifies
All of these must hold in the credit year: total income of 20,000,000 yen or less; floor area of 50 square meters or more (40 or more where total income is 10,000,000 yen or less); a loan term of 10 years or more; move-in within 6 months of acquisition; and continuous residence through December 31 (as of 2026-09).1 Miss one condition in a given year and that year's credit falls away; investor and second-home purchases never qualify at all.1
Year 1: file at the tax office
Year one always means kakutei shinkoku at the tax office, never payroll paperwork.15 Bring the lender's year-end-balance certificate, the registry certificate, the purchase contract, residence confirmation, and the credit computation statement; the office checks the file once and issues the multi-year credit certificate used from year two onward.15
The chart shows the two-track procedure the NTA sets: one filing year, then payroll years for employees and return years for the self-employed.1
Year 2 onward: payroll handles it
From the second year, salaried buyers hand the employer two papers: the tax-office certificate from year one and the current lender balance certificate.1 The employer folds the credit into the December year-end adjustment, and the credit appears in take-home pay rather than as a later refund.1
Self-employed buyers have no payroll to fold anything into, so they claim the credit on the return every year with the same two certificates attached.1 The arithmetic is identical; only the channel differs.
The 20,000,000 yen test runs on total income, so freelance or investment gains stack onto salary in the test. A bumper side-income year can suspend that year's credit while leaving later years intact.
The residence-tax overflow
Where the credit exceeds the income-tax liability, the remainder spills onto residence tax within a cap: in the standard case, 5 percent of the income-tax base up to a 97,500 yen ceiling (as of 2026-09; confirm the current-year figure for your move-in cohort).2 Lower-income buyers with modest income-tax bills therefore still use most of the credit; the overflow, not a refund, is the mechanism that makes that true.
US persons: a credit here, interest there
Japan relieves the purchase through a credit against tax, while the US side may allow mortgage-interest deduction subject to its own limits: the two systems relieve different things, and neither substitutes for the other.6 Currency movement on a yen mortgage can also create US-side gain or loss events that have no Japanese counterpart. Readers with both-system exposure should put the purchase structure in front of a cross-border professional before closing, not after.6
Good to know
Moving out mid-credit kills the remaining years
Continuous residence through each year-end is a standing requirement.1 A job transfer that moves the family out, or a conversion to a rental, ends the credit for the non-resident years; there is no pause-and-resume.
Refinancing or early repayment can shrink the credit
The credit prices the year-end balance and requires a 10-year-plus term.1 Prepayment that shortens the remaining term below the line, or a refinance that resets the loan's character, can remove later years. Model the credit loss before signing the prepayment, not after.
The income cap is tested every single year
One bonus-heavy or sale-heavy year above 20,000,000 yen of total income suspends only that year's credit.1 Later years under the line recover it automatically, so a single spike year is a pause, not a forfeiture.
See also
- Mortgages for Foreign Residents
- Property Taxes and Ongoing Costs
- The Residence-Tax Year-Two Surprise
- US-Japan Tax Treaty: Mechanics and Pitfalls
- Registering as a Sole Proprietor (Kojin Jigyounushi)
- Year-End Adjustment vs. Kakutei Shinkoku: Which You File