How much of a retirement allowance is tax-free?

Up to the retirement income deduction, no tax is due. It is 400,000 yen × years of service (minimum 800,000 yen) for 20 years or less, and 8,000,000 yen + 700,000 yen × (years of service − 20) beyond 20 years. With 10 years of service up to 4,000,000 yen is tax-free, with 20 years 8,000,000 yen, with 30 years 15,000,000 yen, and with 38 years 20,600,000 yen.

What is the take-home amount on a 20 million yen retirement allowance?

It depends on years of service. With 38 years the deduction is 20,600,000 yen, so tax is 0 yen and the take-home amount is 20,000,000 yen. With 35 years the tax is 113,287 yen (income tax 38,287 yen, resident tax 75,000 yen) and the take-home amount is 19,886,713 yen. With 30 years the tax is 405,702 yen and the take-home amount is 19,594,298 yen.

How much tax is due on a 10 million yen retirement allowance?

With 20 years of service, subtracting the 8,000,000 yen deduction leaves 2,000,000 yen, half of which (1,000,000 yen) is the taxable retirement income. Income tax is 51,050 yen and resident tax is 100,000 yen, for a total of 151,050 yen. With 10 years of service the deduction is 4,000,000 yen, the taxable retirement income is 3,000,000 yen, and the tax is 506,752 yen (income tax 206,752 yen, resident tax 300,000 yen).

What is the take-home amount on a 30 million yen allowance after 38 years of service?

The retirement income deduction is 8,000,000 yen + 700,000 yen × 18 years = 20,600,000 yen. (30,000,000 − 20,600,000) × 1/2 = 4,700,000 yen is the taxable retirement income, so income tax of 523,262 yen and resident tax of 470,000 yen, a total of 993,262 yen, is due. The take-home amount is 29,006,738 yen, and tax is about 3.3% of the allowance.

How are partial years of service counted?

Any period shorter than one year is rounded up to one year. If you joined on April 1, 2000 and retire on March 31, 2026, that is exactly 26 years, but retiring on April 1, 2026 is 26 years and 1 day, which counts as 27 years and increases the deduction by 700,000 yen. Because the retirement date can change the tax, calculating from hire and retirement dates is the most reliable.

Why is tax higher if I retire with 5 years or less of service?

An allowance for 5 years or less of service is treated as a "short-term retirement allowance", and the 1/2 reduction cannot be applied to the portion above 3,000,000 yen after the deduction (since 2022). For a 10 million yen allowance, tax is 1,540,822 yen with 5 years of service but 719,482 yen with 6 years, less than half.

How is tax on an officer's retirement allowance calculated?

If the officer service period exceeds 5 years, it is taxed like an employee's: (allowance − deduction) × 1/2. With 5 years or less it becomes a "special officer retirement allowance" and there is no 1/2 reduction. For a 10 million yen allowance with 5 years of service as an officer, the taxable retirement income is 8,000,000 yen and the tax is 2,029,284 yen.

When is resident tax on a retirement allowance paid?

Your company deducts it together with income tax when you receive the allowance and pays it on your behalf (special collection, 特別徴収). Unlike resident tax on salary, you are not billed the following year. The rate is 10%: 6% municipal and 4% prefectural.

Do I need to file a tax return after receiving a retirement allowance?

If you submitted the "Declaration Form for Receipt of Retirement Income" to your company, the tax is settled by withholding and a tax return is generally unnecessary. If you did not, 20.42% of the allowance is withheld as income tax, and filing a tax return refunds the overpaid amount.

Does the tax on a retirement allowance change with annual income or dependents?

No. A retirement allowance is taxed separately from salary and other income (separate taxation, 分離課税), so your income in the year of retirement and whether you have a spouse or dependents are irrelevant. The tax depends only on the allowance amount, years of service, whether you are an officer and whether it is a disability retirement.

Retirement Allowance (退職金) Tax & Take-Home Calculator | Auto-Calculated from the Retirement Income Deduction

Enter your retirement allowance and years of service (or hire and retirement dates) to calculate the retirement income deduction (tax-free allowance), taxable retirement income, income tax (including the special reconstruction income tax), resident tax and your take-home amount. The calculation is shown step by step, along with how much tax you would save with one more year of service and the date after which retiring counts as one more year. It also supports short-term retirement allowances (5 years or less of service), special officer retirement allowances and disability retirement, and shows a tax table by years of service and allowance amount.

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About Retirement Allowance (退職金) Tax & Take-Home Calculator | Auto-Calculated from the Retirement Income Deduction

The Retirement Allowance Tax & Take-Home Calculator works out the income tax, resident tax and take-home amount on a retirement allowance (退職金) from the amount and years of service. A retirement allowance is taxed separately from salary: only half of what remains after subtracting the retirement income deduction (退職所得控除; 400,000 yen per year for up to 20 years of service, 700,000 yen per year beyond that) is taxed. Enter hire and retirement dates and the tool rounds partial years up automatically, and shows the calculation breakdown, the tax difference of one more year of service, and the treatment of short-term retirement allowances (5 years or less), special officer retirement allowances and disability retirement.

How to use Retirement Allowance (退職金) Tax & Take-Home Calculator | Auto-Calculated from the Retirement Income Deduction

1Enter the retirement allowance amount (the gross amount before tax)
2Enter your years of service. Choose to calculate from hire and retirement dates, or to enter years and months directly
3If you are an officer with 5 years or less of service as an officer, select "Officer". If you are retiring because of a disability, tick the checkbox
4Check the take-home amount, total tax, tax-free allowance (retirement income deduction) and the calculation breakdown
5Use the "Table by years of service" tab to compare the tax for each combination of years of service and allowance amount

Great for

Find out the take-home amount of a retirement allowance received at mandatory retirement age
Check how large a retirement allowance can be before any tax is due (the tax-free allowance)
Estimate the tax on an early or voluntary retirement allowance
Check whether moving your retirement date by a few days adds a year of service and reduces tax
Calculate the tax when retiring with 5 years or less of service (short-term retirement allowance)
Calculate the tax on an officer's retirement allowance
Verify that the tax shown on your retirement allowance withholding slip is correct
Know in advance how much you will receive, for post-retirement financial planning

Good to know

The retirement income deduction (退職所得控除額) is 400,000 yen × years of service (minimum 800,000 yen) for up to 20 years, and 8,000,000 yen + 700,000 yen × (years of service − 20) beyond that (Article 30 of the Income Tax Act). If you retire as a direct result of becoming disabled, 1,000,000 yen is added.
Any partial year of service is rounded up to a full year. For example, 25 years and 1 day counts as 26 years. When calculating from hire and retirement dates, the tool also shows the date after which retiring adds one more year of service.
Retirement income (退職所得) is (retirement allowance − retirement income deduction) × 1/2. However, people with 5 years or less of service as an officer (special officer retirement allowance, 特定役員退職手当等) do not get the 1/2. For non-officers with 5 years or less of service (short-term retirement allowance, 短期退職手当等), the 1/2 cannot be applied to the portion above 3,000,000 yen after the deduction.
Income tax is calculated by applying the income tax rate table to the taxable retirement income (rounded down to the nearest 1,000 yen), then multiplying by 102.1% to include the special reconstruction income tax (National Tax Agency, "Quick reference table for withholding tax on retirement income"). Resident tax (住民税) is 10% (6% municipal and 4% prefectural), each rounded down to the nearest 100 yen.
Because a retirement allowance is taxed separately from other income, annual income, family structure and dependents do not change the tax amount.
If you submitted the "Declaration Form for Receipt of Retirement Income" (退職所得の受給に関する申告書) to your employer, the tax is settled by withholding (源泉徴収) when you receive the allowance, and a tax return is generally unnecessary. If you did not, 20.42% of the allowance is withheld and settled through a tax return.
If you receive retirement allowances from multiple companies in the same year, or have previously received another retirement allowance or a lump sum from iDeCo or a corporate DC plan, the deduction is adjusted according to overlapping service periods. This tool does not include that adjustment.
Everything you enter is calculated in your browser and is not sent to any server.

Questions this tool answers

Use Retirement Allowance (退職金) Tax & Take-Home Calculator | Auto-Calculated from the Retirement Income Deduction for searches like these:

I want to calculate the tax on my retirement allowance
I want to know my take-home retirement allowance
I want to know how much of my retirement allowance is tax-free
I want to calculate the retirement income deduction from years of service
I want to know the tax on a 20 million yen retirement allowance
I want to know whether rounding up years of service changes the tax
I want to know the tax on a retirement allowance with 5 years or less of service
I want to calculate the tax on an officer's retirement allowance
I want to check whether the withholding on my retirement allowance is correct
I want to see a tax table of retirement allowances by years of service

FAQ

How much of a retirement allowance is tax-free?: Up to the retirement income deduction, no tax is due. It is 400,000 yen × years of service (minimum 800,000 yen) for 20 years or less, and 8,000,000 yen + 700,000 yen × (years of service − 20) beyond 20 years. With 10 years of service up to 4,000,000 yen is tax-free, with 20 years 8,000,000 yen, with 30 years 15,000,000 yen, and with 38 years 20,600,000 yen.
What is the take-home amount on a 20 million yen retirement allowance?: It depends on years of service. With 38 years the deduction is 20,600,000 yen, so tax is 0 yen and the take-home amount is 20,000,000 yen. With 35 years the tax is 113,287 yen (income tax 38,287 yen, resident tax 75,000 yen) and the take-home amount is 19,886,713 yen. With 30 years the tax is 405,702 yen and the take-home amount is 19,594,298 yen.
How much tax is due on a 10 million yen retirement allowance?: With 20 years of service, subtracting the 8,000,000 yen deduction leaves 2,000,000 yen, half of which (1,000,000 yen) is the taxable retirement income. Income tax is 51,050 yen and resident tax is 100,000 yen, for a total of 151,050 yen. With 10 years of service the deduction is 4,000,000 yen, the taxable retirement income is 3,000,000 yen, and the tax is 506,752 yen (income tax 206,752 yen, resident tax 300,000 yen).
What is the take-home amount on a 30 million yen allowance after 38 years of service?: The retirement income deduction is 8,000,000 yen + 700,000 yen × 18 years = 20,600,000 yen. (30,000,000 − 20,600,000) × 1/2 = 4,700,000 yen is the taxable retirement income, so income tax of 523,262 yen and resident tax of 470,000 yen, a total of 993,262 yen, is due. The take-home amount is 29,006,738 yen, and tax is about 3.3% of the allowance.
How are partial years of service counted?: Any period shorter than one year is rounded up to one year. If you joined on April 1, 2000 and retire on March 31, 2026, that is exactly 26 years, but retiring on April 1, 2026 is 26 years and 1 day, which counts as 27 years and increases the deduction by 700,000 yen. Because the retirement date can change the tax, calculating from hire and retirement dates is the most reliable.
Why is tax higher if I retire with 5 years or less of service?: An allowance for 5 years or less of service is treated as a "short-term retirement allowance", and the 1/2 reduction cannot be applied to the portion above 3,000,000 yen after the deduction (since 2022). For a 10 million yen allowance, tax is 1,540,822 yen with 5 years of service but 719,482 yen with 6 years, less than half.
How is tax on an officer's retirement allowance calculated?: If the officer service period exceeds 5 years, it is taxed like an employee's: (allowance − deduction) × 1/2. With 5 years or less it becomes a "special officer retirement allowance" and there is no 1/2 reduction. For a 10 million yen allowance with 5 years of service as an officer, the taxable retirement income is 8,000,000 yen and the tax is 2,029,284 yen.
When is resident tax on a retirement allowance paid?: Your company deducts it together with income tax when you receive the allowance and pays it on your behalf (special collection, 特別徴収). Unlike resident tax on salary, you are not billed the following year. The rate is 10%: 6% municipal and 4% prefectural.
Do I need to file a tax return after receiving a retirement allowance?: If you submitted the "Declaration Form for Receipt of Retirement Income" to your company, the tax is settled by withholding and a tax return is generally unnecessary. If you did not, 20.42% of the allowance is withheld as income tax, and filing a tax return refunds the overpaid amount.
Does the tax on a retirement allowance change with annual income or dependents?: No. A retirement allowance is taxed separately from salary and other income (separate taxation, 分離課税), so your income in the year of retirement and whether you have a spouse or dependents are irrelevant. The tax depends only on the allowance amount, years of service, whether you are an officer and whether it is a disability retirement.

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