Key Facts
• December 19, 2025: 2026 tax reform outline announced by government and ruling parties.
• Tax reform bill to be submitted to the ordinary Diet session in January 2026.
• Income tax non-taxable threshold raised from 1.6 million yen to 1.78 million yen.
• Expansion targets middle-income earners with annual income up to 6.65 million yen (~80% of taxpayers).
• Housing loan tax credit extended to December 31, 2030, with increased deduction limits:
– Standard: 30 million yen → 35 million yen for certified/ZEH-level homes.
– Young couples/child-rearing households: up to 45 million yen.
• Deduction period extended from 10 to 13 years for eligible homes.
• Minimum floor area for used homes reduced from 50 to 40 square meters.
• Fixed asset tax reduction for home renovations extended 5 years to March 31, 2031.
• Furusato nozei (hometown tax) deduction capped at 1.93 million yen; fundraising cost ratio lowered to 40% by 2029.
• Self-medication tax deduction for OTC drugs extended; scope revised; some exclusions added.
• Departure tax increased from 1,000 yen to 3,000 yen per person from July 2026.
• Passport application fees reduced by up to 7,000 yen.
• Environmental performance tax abolished by March 31, 2026; vehicle tax (“type-based tax”) to increase from 2028.
• Eco-car tax breaks extended but fuel efficiency standards tightened from May 2027.
• Cryptocurrency income tax rate unified at 20% from 2028, down from up to 55%.
• Introduction of “Children’s NISA” allowing tax-free investment from age 0, with annual limit 600,000 yen.
• Meal allowance non-taxable limit raised from 3,500 yen to 7,500 yen per month, first change in 40 years.
Summary
The 2026 tax reform outline, announced in December 2025, introduces significant changes aimed at increasing take-home pay for working households. Key measures include raising the income tax non-taxable threshold to 1.78 million yen, benefiting about 80% of taxpayers, and extending housing loan tax credits with higher deduction limits, especially for certified and energy-efficient homes. Fixed asset tax reductions for renovations are prolonged, while hometown tax deductions face new caps and stricter fundraising rules. The self-medication tax deduction is extended with revised drug eligibility. Departure tax triples, but passport fees drop substantially. Vehicle taxes see a major overhaul with the abolition of the environmental performance tax and increased annual taxes on electric vehicles. Cryptocurrency taxation is simplified and reduced to 20%. The new Children’s NISA enables tax-free investments from birth, supporting long-term asset building. Additionally, the meal allowance non-taxable limit doubles, reflecting inflation adjustments. Overall, these reforms represent a comprehensive effort to ease tax burdens and support household finances amid inflation and wage growth, while encouraging health, environmental, and investment initiatives.
