Talk:Furusato Nozei

Donation limit

"The maximum amount of tax credit deductible for Furusato Nouzei is 20% of the total amount of Residential Taxes" - I do not think this is correct. Here is the exact calculation formula: "20% of residence tax / (100% - residence tax rate - (income tax rate - reconstruction tax rate)) + ¥2000" I think we need to either explain the precise formula, or summarise that it's easiest to use a simulator to get a rough idea. I went with the second option, but now we've started to add the calculation details, we should provide the correct calculation. －Adamu (talk) 15:28, 27 November 2021 (JST)

The Calculation

1. You Take your Gross Income under the Aggregate Taxation Method

2. You deduct all Deductions and Allowances; Accidental Loss, Medical Expenses, Social Insurance Premiums, Mutual Aid Plan Deductions, Life Insurance Premiums, Earthquake Insurance Premiums, Charitable Donations and Contributions, Spouse Allowance, Dependents' Allowances, Widow or Widower Allowance, Working Student Allowance, Carer Allowance, Public Pension Deduction, Home Loan Tax Deduction, Basic Allowance, and anything else, leaving the Taxable Salary

3. You calculate the National, Reconstruction, and Residents' Taxes

4. You take your Gross Income under the Separate Taxation Method, such as Interest, Capital Gains, Dividends, etc.

5. You calculate the National, Reconstruction, and Residents' Taxes

6. You add together all the National, Reconstruction, and Residents' Taxes

7. You take the total amount of Residents' Taxes and multiply it by 25% (If the Deduction is equal to 25% of the Residents' Taxes, it is 20% of the total Residents' Taxes + Furusato Nozei Deduction Amount)

8. You Note this value and add it to the Charitable Donations and Contributions Deduction in 2. above. This will of course reduce the Total Taxable Income and the National, Reconstruction, and Residents' Taxes.

9 Repeat until you converge on the number that does not change the outcome, or the upper limit of ¥1,500,000. (Which would represent a Taxable Income after all Allowances of upward of ¥34,000,000.

10. That is then the maximum deduction you can claim. You can spend ¥2,000 more than that, as you have to pay that first ¥2,000.

The above calculation takes into account that you will receive a larger deduction if your Total Taxable Salary puts you in a higher Marginal Rate National Tax Band than a lower one to compensate for the higher marginal tax rate, but the "20% of residence tax" on the top of the fraction is dependent on the output of the formula.