Flat-rate Tax Reduction in Individual Resident Tax in FY 2024

In the Tax Reform Proposal for FY2024 (Cabinet decision on December 22, 2023), a flat-rate tax reduction for income tax and individual resident tax for the FY 2024 will be implemented in order to ease the burden on citizens whose wage increases have not kept pace with price hikes and to achieve an economy in which wage increases are sustained and sufficiently exceed price hikes. 
The following is a summary of the flat-rate tax reductions for “individual resident tax:
*Please check the National Tax Agency (国税庁) website (link to external site) for information on flat-rate income tax reductions.
The National Tax Agency（国税庁）website（Japanese Only)（外部サイトへリンク）

●Eligibility:
Taxpayers whose total income in the previous year was less than 18.05 million yen (equivalent to less than 20 million yen of salary income in the case of those with salary income only)

The following are excluded:

• Those whose total income in the previous year exceeded 18.05 million yen.
• Those whose gross income for the previous year is below the tax exemption limit.
• Those whose taxable gross income comes out zero due to the income deduction.
• Those whose amount of income levy will be zero, even before the flat-rate tax reduction is applied, due to tax credits.

*１ This flat-rate tax reduction is based on the deduction from the income levy amount for taxpayers whose total income in the previous year was less than 18.05 million yen (equivalent to less than 20 million yen in the case of those who have a salary income only), and there is no tax deduction from the per capita basis tax rate, interest rate, dividend rate, and per share of income from transfer of stocks and other securities.

*２ This applies only to those who have a domicile in Japan.

●How to calculate the amount of flat-rate tax reduction: 
The taxpayer, and their spouse and dependents (limited to domestic residents) who are eligible for the tax credit A fixed amount of tax reduction of 10,000 yen per person will be deducted from the amount of income levy.

* For those who have a spouse in same livelihood who is not subject to the reduction, 10,000 yen will be deducted from the amount of income levy for the individual resident tax for the FY2025.
(A spouse in same livelihood means a person with a tax payer whose total income exceeds 10 million yen and the person’s total income does not exceed 480,000 yen.)

Example of tax reduction calculation：
In the case of three-person household with one spouse and one dependent, and also its total income of the previous year is less than 18.05 million yen.

・Flat-rate tax reduction in individual resident tax income levy　　
10,000 yen x ３＝30,000 yen 　　Amount of reduction: 30,000 yen

●How to implement the flat-rate tax reduction: 
・In the case of special tax collection for employment income earners
The amount of tax will not be collected for June 2024, but the amount of tax will be collected monthly by equalizing the “annual tax amount after flat-rate tax reduction (after reduction)” for the 11 months from July 2024 to May 2025.

・In the case of ordinary tax collection:
The amount of reduction will be deducted from the tax amount for the first term (June 2024) calculated based on the “annual tax amount before the flat-rate tax reduction, however, if it cannot be fully deducted from the first term, it will be sequentially deducted and collected from the second and following terms (August 2024).

・In the case of special tax collection on income from public pensions, etc.: 
The amount of reduction will be deducted from the tax amount for October, 2024 which is calculated based on the “annual tax amount before the flat-rate tax reduction, however, if it cannot be fully deducted, it will be sequentially deducted and collected from the special collection amount in December, 2024 and following months.　(No deduction will be made from the provisional special tax amount.)

However, in the case of the individual resident tax in the FY 2024 is collected according to special collection method from the income related to public pensions, etc. for the first time, the reduction will be made for June and August of the same year according to the ordinary collection method which is mentioned above, and if the reductions are not made, they will be made sequentially from the special collection tax amount for October 2024 and following months.

●Other notes: 
Regarding to the effect on the income levy amount, which is the basis for the calculation in each system, the individual resident tax for the fiscal year 2024 will be calculated based on the amount before the flat-rate tax reduction, so there will be no impact from the flat-rate tax reduction against the income levy amount under the following situations:
・The income levy amount in the calculation of the maximum amount of special deduction for donation tax credit (Furusato-nozei).
・The income levy amount in the calculation of special collection from the pension benefit payment for the following FY(April, June, and August 2025).

●Flat-rate tax reduction for the spouse in same livelihood other than a spouse who is eligible for a tax credit:
A spouse of a taxpayer with total income of 10 million yen or more in the previous year (a spouse of the same household, who is not eligible for the tax credit) is not considered as a dependent for the flat-rate tax reduction for individual resident tax for the FY 2024, however, they will receive a tax reduction of 10,000 yen for the individual resident tax for the FY 2025 if the taxpayer has such a spouse. 

●Benefits (adjusted benefits) for those who are expected to be unable to fully reduce their fixed-rate taxes: 
The flat-rate tax reduction is reduced from the income levy amount after all deductions, such as the mortgage deduction and the tax credit for donations, have been made. If the amount of tax reduction calculated based on the number of taxpayers and their dependents (including spouses) (available amount for the flat-rate tax reduction) exceeds the amount of income tax before the flat-rate tax reduction or the income levy amount of individual resident tax, and it is expected that the full amount of tax reduction will not be able to reduced, a balance of benefit (adjusted benefit) will be provided.
For details of the benefit, please refer to the Cabinet Secretariat (内閣官房) website (link to external site).
The Cabinet Secretariat(内閣官房)website(Japanese Only)（外部サイトへリンク）