Income Tax vs Resident Tax in Japan: How the Taxes Taken from Your Salary Are Calculated

How the two taxes differ

Income tax is paid to the national government, and resident tax to the municipality where you live. The calculations are similar, but they differ in the following ways.

Resident tax has smaller deductions, so on the same income, the taxable amount is larger for resident tax. At an annual income of 5 million yen, taxable income is 2,158,000 yen for income tax and 2,408,000 yen for resident tax.

From gross pay to tax

Here are four steps for an annual income of 5 million yen (under 40, no dependents, Tokyo).

1. 1

   Find your employment income

   Subtract the employment income deduction of 1,440,000 yen from gross pay of 5,000,000 yen to get 3,560,000 yen. This deduction is set by a formula based on income. From the 2025 tax year, its minimum rose to 650,000 yen (a flat 650,000 yen for incomes of 1.9 million yen or less), and its maximum is 1,950,000 yen.

2. 2

   Subtract income deductions

   Subtract the social insurance deduction of 721,460 yen (the full amount actually paid) and the basic deduction, which is 680,000 yen for income tax (at this income level) and 430,000 yen for resident tax.

3. 3

   Fix your taxable income

   Dropping amounts under 1,000 yen gives 2,158,000 yen for income tax and 2,408,000 yen for resident tax.

4. 4

   Apply the rates

   For income tax, 2,158,000 yen × 10% − 97,500 yen = 118,300 yen, plus the 2.1% special reconstruction income tax, gives 120,700 yen (dropping amounts under 100 yen). For resident tax, 2,408,000 yen × 10% = 240,800 yen, minus the 2,500-yen adjustment deduction, plus the 5,000-yen per capita portion, gives 243,300 yen.

The income tax quick table runs: taxable income up to 1.95 million yen at 5%, up to 3.3 million yen at 10% (deduct 97,500 yen), up to 6.95 million yen at 20% (deduct 427,500 yen), up to 9 million yen at 23%, up to 18 million yen at 33%, and so on. The deduction adjusts for the part taxed at the lower bands' rates.

Tax and rate by annual income

These are the amounts at different incomes under the same conditions. You can see where the income tax rate rises, and how resident tax grows at a nearly constant rate.

Up to the 6 million yen range, resident tax is higher, and income tax overtakes it somewhere above 7 million yen. Income tax is progressive, so it grows faster than income, while resident tax is a flat 10%, so it grows in proportion.

Resident tax arrives a year late

Resident tax is charged on the previous year's income and starts being deducted the following June. This delay is why your take-home pay may not match your expectations.

• First year out of school: with almost no income the year before, no resident tax is deducted. It starts in June of your second year, so take-home pay falls by 10,000 yen or more on the same salary.
• The year after a raise: income tax goes up that year, but resident tax goes up from the following June. The effect of a raise arrives in two delayed stages.
• The year after leaving a job: even with no income, you have to pay resident tax on the previous year's income. It's either collected in a lump sum before you leave or paid by yourself with a payment slip.
• Joining partway through a year: resident tax is for the previous year, so an amount based on your income at your previous job is deducted.

The Take-Home Pay Calculator includes resident tax on the assumption that the same income continues. To find your take-home pay in your first working year, take the resident tax shown back out. At 5 million yen, that's a difference of 243,300 yen a year, or about 20,000 yen a month.

How much deductions reduce your tax

Income deductions reduce the amount subject to tax, not the tax itself. So the tax saved is deduction × tax rate, and the effect is greater at higher rates. Here are actual differences at an annual income of 6 million yen (income tax rate 10%).

A child aged 19 to 22 counts as a specific dependent, with larger deductions of 630,000 yen for income tax and 450,000 yen for resident tax, compared with 380,000 and 330,000 yen for general dependents. Children under 16, by contrast, are excluded from the dependent deduction because of the child allowance, so the tax doesn't change.

Check the tax breakdown with the tool

In the "Annual income to take-home" tab of the Take-Home Pay Calculator, open "Show how taxes are calculated" to see the employment income deduction, social insurance deduction, basic deduction, taxable income, rate and tax in order, in yen. Income tax and resident tax appear in separate columns, so the differences in deductions are easy to see.

Enter your spouse and number of dependents, and amounts such as iDeCo and life insurance deductions, in "Set conditions" to compare how much your tax falls. For social insurance calculations, see how to calculate social insurance premiums, and for overall take-home pay, see how to calculate take-home pay.

FAQ

What's the difference between income tax and resident tax?

Income tax is a national tax on that year's income, with progressive rates from 5% to 45%. Resident tax is a local tax on the previous year's income, at a flat 10% plus a 5,000-yen per capita portion. Basic deductions also differ, up to 950,000 yen for income tax and 430,000 yen for resident tax, so on the same income, the taxable amount is larger for resident tax.

When does resident tax start being deducted?

Tax on the previous year's income is deducted from monthly pay in 12 installments, from June of the next year to May of the year after. In your first year out of school there's no previous income, so nothing is deducted until June of your second year. At 5 million yen, it's 243,300 yen a year, or about 20,000 yen a month, which is why take-home pay seems to drop in your second year.

How much are income tax and resident tax on 5 million yen?

With no dependents in Tokyo, income tax is 120,700 yen and resident tax is 243,300 yen, for a total of 364,000 yen. Taxable income for income tax is 2,158,000 yen at a 10% rate. Taxable income for resident tax is 2,408,000 yen, which gives an income portion of 240,800 yen, plus the 5,000-yen per capita portion. Together with social insurance premiums of 721,460 yen, total deductions from pay come to 1,085,460 yen.

How much tax do you save with more dependents?

If someone earning 6 million yen supports a spouse with no income, income tax falls by 38,800 yen and resident tax by 33,000 yen, raising take-home pay by 71,800 yen. With a child aged 19 to 22 (a specific dependent) as well, the difference from being single is 173,000 yen. Children under 16 are excluded from the dependent deduction because of the child allowance, so the tax doesn't change.

How much tax does iDeCo save?

The full contribution is an income deduction, so the tax saved is contribution × (income tax rate + 10% resident tax). At an income of 6 million yen, contributing 23,000 yen a month (276,000 yen a year) cuts income tax by 28,200 yen and resident tax by 27,600 yen, raising take-home pay by 55,800 yen a year. Enter your annual contribution in "Other income deductions" in the tool to reflect it.