Employment Income Deduction
The Employment Income Deduction (給与所得控除) is a deduction applied to employment income before any other deductions, for the purposes of calculating National Income Tax and Residence Tax.
This deduction applies specifically to employment income (給与所得) for people earning income from an employment contract, and is deducted before any of the other income deductions are applied.
| Employment Income (inclusive) | Deduction amount |
|---|---|
| Up to ¥1,625,000 | ¥550,000 |
| ¥1,625,001 to ¥1,800,000 | amount × 40％ - ¥100,000 |
| ¥1,800,001 to ¥3,600,000 | amount × 30％ + ¥80,000 |
| ¥3,600,001 to ¥6,600,000 | amount × 20％ + ¥440,000 |
| ¥6,600,001 to ¥8,500,000 | amount × 10％ + ¥1,100,000 |
| ¥8,500,001 and above | ¥1,950,000 (upper limit) |
The purpose of the adjustments to the percentages in the second column are to ensure the same amount of deduction is applied for the lower income bands, even for people on higher bands. For example, somebody on ¥1.7M income will get the ¥550,000 yen deduction for the first ¥1,625,000. Calculating 40% of the remaining ¥75k above ¥1,525,000 gives ¥30k, so their total deduction is ¥550,000 + ¥30,000 = ¥580,000. This is equivalent to taking 40% of their entire income (¥1,700,000 × 40% = ¥680,000) and subtracting the adjusted amount (¥680,000 - ¥100,000 = ¥580,000).
This deduction is subtracted from employment income, and rounded down to the nearest ¥1000 for the purposes of calculating tax.
Official English Guidance
The National Tax Agency has an official English article about this deduction, confusingly subtitled about claiming expenses. The calculations there are much more complex than the table listed here, but the results are the same. The difference is that the calculations for the NTA article calculate the amount of taxable income, including exhaustively rounding down to the nearest ¥1000, whereas the table above calculates the deduction amount, which much be subtracted from employment income and rounded down to produce the amount of taxable income.