Japan's Income Walls: How 1.06, 1.3 and 1.6 Million Yen Change Your Take-Home Pay

Telling the four walls apart

What are called income walls fall broadly into tax lines and social insurance lines. Under the rules from the 2025 tax year, they are as follows.

The former 1 million and 1.03 million yen walls have moved to 1.1 million and 1.6 million yen, because the minimum employment income deduction was raised to 650,000 yen and the basic deduction to a maximum of 950,000 yen. These numbers tend to take on a life of their own, so first check which line actually applies to you.

Crossing a tax wall doesn't reduce take-home pay

When resident or income tax begins, the tax never rises by more than your extra income. Here is take-home pay by annual income, assuming you don't join social insurance.

Above 1.1 million yen, the 5,000-yen per capita portion of resident tax applies all at once, so take-home pay at 1.11 million yen is only 3,845 yen more than at 1.1 million yen. But it hasn't gone down. As for income tax, it's just 2,000 yen at 1.65 million yen. There's almost no need to limit your hours because of a tax wall.

How much the social insurance wall costs

The problem is the social insurance lines. If you join health insurance and employee pension yourself, about 15% of your income goes to premiums. Here's the 1.06 million yen line as an example.

Earning just 10,000 yen more cuts take-home pay by 138,999 yen, and it doesn't recover until 1.24 million yen. So the roughly 190,000 yen from 1.05 to 1.24 million yen is a stretch where working more doesn't raise your take-home pay. This is what people call working at a loss.

The same thing happens at the 1.3 million yen line. Take-home pay of 1,260,205 yen at 1.29 million yen falls by 159,835 yen to 1,100,370 yen at 1.3 million yen, and doesn't recover until 1.51 million yen. If you're going to cross it, the rational choice is either to go all the way to the recovery point or to stay just below the line.

Which line is yours: 1.06 or 1.3 million yen?

1.06 million yen is the line for joining your employer's social insurance yourself, and 1.3 million yen is the line for leaving dependent status under a spouse or other family member. If you meet all of these conditions, 1.06 million yen is your line.

• Scheduled working hours of 20 or more per week
• Monthly wages of 88,000 yen or more (equivalent to 1.06 million yen a year, excluding bonuses, overtime and commuting allowance)
• Expected to be employed for more than 2 months
• Not a student
• Working at a company with 51 or more employees

If any one of these doesn't apply, your line is 1.3 million yen. Note that 1.3 million yen is judged on expected income for the next year, so you may lose dependent status as soon as you switch partway through the year to work paying more than 108,334 yen a month. Keep in mind this differs from the tax walls, which are judged on the total from January to December.

Also, your spouse's deductions (the spouse deduction and special spouse deduction) stay at the full amount up to an income of 1.6 million yen for you. For a spouse earning 6 million yen, the 71,800-yen deduction effect holds until your income reaches 1.6 million yen, then falls in stages to 62,700 yen at 1.7 million yen and 42,500 yen at 1.8 million yen, and disappears at about 2.01 million yen. It doesn't vanish suddenly.

What you gain by joining

Take-home pay falls, but joining social insurance increases your coverage. This is the part you miss if you judge by the amount alone.

• Higher future pension: you receive employee pension on top of national pension. It increases for life with your enrollment period and standard monthly remuneration.
• Sickness allowance: while you can't work due to illness or injury, you receive about two-thirds of your standard monthly remuneration for up to 1 year 6 months. It isn't available to dependents.
• Maternity allowance: about two-thirds is also paid during pre- and postnatal leave.
• Employee disability pension: if you become disabled, it's added to the national disability basic pension. Grade 3 is paid by employee pension alone.
• Your employer pays half the premiums: unlike joining national health insurance and national pension yourself, the company pays half.

If your spouse's employer pays a family allowance, check its conditions too. If it requires you to stay within dependent limits, your household's take-home pay can fall further by the amount of the allowance.

Check your own wall with the tool

1. 1

   Open the "Income walls" tab

   A line graph shows take-home pay calculated in 10,000-yen steps from 900,000 to 2.2 million yen of annual income.

2. 2

   Choose your enrollment conditions

   Switching whether your employer is covered by the expansion (20 or more hours a week, 51 or more employees and so on) swaps the 1.06 and 1.3 million yen lines.

3. 3

   Enter your annual income

   It shows the results for resident tax, income tax and social insurance, along with a take-home pay breakdown. It also shows the income needed to get back to the take-home pay just below the enrollment line.

How premiums are calculated if you join is covered in how to calculate social insurance premiums, and the tax side in income tax vs resident tax. For take-home pay when working full-time, the table in how to calculate take-home pay is a useful reference.

FAQ

So what are the income walls?

The tax walls are 1.1 million yen for resident tax and 1.6 million yen for income tax. The social insurance wall is 1.06 million yen if you meet conditions such as 20 or more hours a week at an employer with 51 or more employees, and 1.3 million yen if you don't. Only the social insurance walls have a large effect on take-home pay. Crossing a tax wall doesn't reduce it.

How much does take-home pay fall above 1.06 million yen?

Take-home pay at 1.05 million yen is 1,044,225 yen, but joining social insurance at 1.06 million yen makes it 905,226 yen, a fall of 138,999 yen. It recovers at 1.24 million yen. At the 1.3 million yen line, 1,260,205 yen at 1.29 million yen falls by 159,835 yen to 1,100,370 yen at 1.3 million yen, and recovers at 1.51 million yen.

Has the 1.03 million yen wall gone away?

The line where income tax begins has moved to 1.6 million yen, because the minimum employment income deduction rose from 550,000 to 650,000 yen and the basic deduction to a maximum of 950,000 yen. The line where resident tax begins has also risen from 1 million to 1.1 million yen. But the social insurance lines of 1.06 and 1.3 million yen are a separate system and didn't move with this revision.

Up to what income does the spouse deduction apply?

If your spouse's income is up to 1.6 million yen, you get the full amount (380,000 yen for income tax, 330,000 yen for resident tax) through the spouse or special spouse deduction. Above 1.6 million yen it falls in stages and disappears at about 2.01 million yen. For someone earning 6 million yen, the effect is 71,800 yen, falling to 62,700 yen at a spouse's income of 1.7 million yen and 42,500 yen at 1.8 million yen.

Is it ever better to join social insurance?

On take-home pay alone, staying just under the line wins, but employee pension raises your future pension for life, and you become eligible for sickness and maternity allowances. Your employer pays half the premiums. If you can work up to the recovery point (1.24 million yen for the 1.06 million yen line, 1.51 million yen for the 1.3 million yen line), both your take-home pay and your coverage increase.