Japan's Self-Medication Tax System vs the Medical Expense Deduction: Which Is Better?
If you often buy over-the-counter medicine in Japan, you can choose the self-medication tax system instead of the medical expense deduction. You can use only one of them, so you need to compare which returns more. Using real amounts, this article covers how the 2 systems differ, the conditions and eligible medicines for the self-medication tax system, and a simple way to tell which is better.
How the 2 systems differ
The self-medication tax system (a special medical expense deduction for over-the-counter medicine containing ingredients from prescription drugs) began with the 2017 tax year. It's meant to ease the burden on people who treat themselves with over-the-counter medicine instead of going to the hospital, and it differs from the regular medical expense deduction in these ways.
| Item | Medical expense deduction | Self-medication tax system |
|---|---|---|
| Eligible costs | Consultations, hospitalization, prescription medicine, over-the-counter medicine for treatment, transport to the hospital, etc. | Only purchases of eligible medicine (such as switch OTC drugs) |
| Threshold | 100,000 yen (5% of income if income is under 2 million yen) | 12,000 yen |
| Maximum deduction | 2 million yen | 88,000 yen |
| Other conditions | None | You must have had health checkups, vaccinations or similar |
| Combining family costs | Yes | Yes |
The 2 can't be combined in the same year: you choose one and file a tax return. Once you've chosen and filed, you can't later switch to the other through a request for correction, so it's important to compare before filing.
Conditions for the self-medication tax system
- You've bought eligible medicine: look for a mark on the receipt showing an eligible product (such as ★) and the common identification mark on the package. Not all over-the-counter medicine qualifies
- You've taken steps to maintain your health and prevent illness: any of a company's regular health checkup, a specific health checkup (metabolic syndrome screening), a vaccination, municipal cancer screening, a full health checkup, or similar
- The person filing must have taken those steps: eligible medicine bought for family can be combined, but the filer must have taken the steps personally
Documents proving these steps (such as health checkup results) no longer need to be attached to the return from the 2021 tax year onward, but keep them so you can show them if the tax office asks. Tax reforms have extended this special measure before, so check the National Tax Agency's guidance to see whether the year you're filing for is covered.
Comparison examples
These examples are for an employee under 40 earning 5 million yen (10% income tax rate), varying the year's total medical costs (including over-the-counter medicine) and the amount of eligible medicine within it.
| Total medical costs | Of which eligible medicine | Returned by medical expense deduction | Returned by self-medication | Better option |
|---|---|---|---|---|
| 80,000 yen | 50,000 yen | 0 yen | 7,680 yen | Self-medication |
| 110,000 yen | 40,000 yen | 2,021 yen | 5,659 yen | Self-medication |
| 130,000 yen | 60,000 yen | 6,063 yen | 9,701 yen | Self-medication |
| 150,000 yen | 50,000 yen | 10,105 yen | 7,680 yen | Medical expense deduction |
| 200,000 yen | 80,000 yen | 20,210 yen | 13,743 yen | Medical expense deduction |
Even when total medical costs exceed 100,000 yen, the self-medication tax system can be better. With 130,000 yen in costs (60,000 yen of it eligible medicine), the medical expense deduction is 30,000 yen and the self-medication deduction is 48,000 yen, and the larger deduction returns more.
A simple way to tell
If your income is 2 million yen or more and you bought no more than 100,000 yen of eligible medicine, you can tell as follows.
With income under 2 million yen, the medical expense deduction's threshold is below 100,000 yen, so it tends to be better. For example, with a salary of 1.5 million yen and 80,000 yen in costs (40,000 yen of it eligible medicine), the medical expense deduction is 37,500 yen and the self-medication deduction is 28,000 yen, so the medical expense deduction returns more (the 5% rule for income under 2 million yen).
What to watch for when filing
- Eligible medicine also counts as medical costs for the medical expense deduction, so the same receipts work whichever you choose
- When combining family costs, the person who took the health steps files. Even if a stay-at-home spouse has had no checkup, it's enough that the filer has
- Filing a tax return voids the furusato nozei one-stop exception, so enter the donation deduction at the same time
- If hospitalization or surgery raises your costs during the year, compare again at the end of the year
Compare both with the tool
In the Calculate refund tab of the Medical Expense Deduction Refund Calculator, enter your total medical costs and the amount of eligible self-medication medicine you bought. It shows what each system returns side by side and indicates the better one. How the tax returned is calculated from the deduction is explained in how much the medical expense deduction returns, and what besides over-the-counter medicine counts in what the medical expense deduction covers.
FAQ
- Can I use both the self-medication tax system and the medical expense deduction?
- No. For a given year, you choose one and file. You also can't switch to the other through a request for correction after filing, so compare both deductions before choosing.
- If my medical costs exceed 100,000 yen, is the medical expense deduction better?
- Not necessarily. If costs other than eligible medicine are under 88,000 yen, the self-medication deduction may be larger. With 130,000 yen in costs, 60,000 yen of it eligible medicine, the medical expense deduction is 30,000 yen and the self-medication deduction is 48,000 yen.
- How do I identify products eligible for the self-medication tax system?
- Look for the common identification mark on the package, or the mark (such as ★) next to eligible products on a drugstore receipt. Medicines with the same effect can be eligible or not, so checking the receipt is the surest way.
- Can't I use the self-medication tax system without a health checkup?
- The filer must have had a health checkup, specific health checkup, vaccination, cancer screening or similar. A company's regular health checkup or a flu vaccination also meets the condition.
Tools in this article
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