What is the refundable tax credit of "¥40,000 per person"? Differences from the fixed-amount tax cut, who is covered, and when it starts
As a measure against rising prices, the government and the ruling and opposition parties are discussing the introduction of a "refundable tax credit." Reports point to ¥40,000 per person as the leading proposal, and questions such as "So how much will I actually get?" and "How is it different from the fixed-amount tax cut?" are increasing. This article gently organizes the mechanism, who is covered, the timing, and how you receive it, based on the latest developments as of June 2026.
The refundable tax credit is at the stage where the government and the ruling and opposition parties are debating the system design at the "National Conference"[Cabinet Secretariat (in Japanese)]. Points such as "¥40,000 per person" and "introduction in fiscal 2027" are all proposals or projections, and the amount, coverage, and start timing may change through future discussions and Diet deliberations. The figures in this article are not confirmed information.
What is a refundable tax credit? (the basic mechanism)
A refundable tax credit is a mechanism that combines a "deduction from taxes" with a "cash benefit." A certain amount is subtracted from income tax (a tax credit), and for people whose tax is too small to fully absorb the credit, the difference is paid out in cash. This means that even low-income people who pay little tax can receive the full support — that is the distinctive feature.
With a pure tax credit alone, people who pay little tax cannot absorb it fully and receive less benefit. Supplementing that with a cash benefit is what "refundable" means. Similar systems exist overseas (such as the Earned Income Tax Credit in the United States), and the design is being discussed with reference to them.
How is it different from the fixed-amount tax cut?
It is often confused with the "fixed-amount tax cut" implemented in 2024, but the way it reaches low-income earners differs greatly.
Fixed-amount tax cut (2024)
・People who cannot fully absorb it end there (supplemented separately by an "adjustment benefit")
・A temporary measure
・Pointed out as complex and hard to understand
Refundable tax credit (proposal)
・Low-income earners can receive the full amount too
・Aims to be a permanent system
・Designed so support reaches people according to income
The fixed-amount tax cut only "subtracts from taxes," so the less tax a person paid, the smaller the benefit. A refundable tax credit "pays out the portion that cannot be subtracted," so its biggest difference is that it more readily reaches precisely the low-income people.
How much will you get? The "¥40,000 per person" proposal
The proposal reported as the leading one is ¥40,000 per person. This is said to be based on the idea that "the annual consumption tax burden on food and the like is about ¥40,000 per person"[explanatory article]. However, the amount is at the proposal stage and not officially decided.
Because it is "per person," a design in which the number of family members is covered is assumed.
A household of four with 2 adults + 2 children: ¥40,000 × 4 people = ¥160,000 (a rough estimate based only on the leading proposal)
* The actual amount, how the number of people is counted, and any increase or decrease by income are undecided.
Who is covered?
Coverage is being discussed centered on the middle- and low-income working generation, in a direction that also includes people who are holding back their way of working because they face the "income wall"[Nikkei]. Because a benefit (cash) is also provided, a design in which residence-tax-exempt households are also covered is being considered.
| Position | Direction of coverage (outlook as of June 2026) |
|---|---|
| Employees / part-timers | In the direction of covering the middle- and low-income bracket. Discussion also includes people holding back their way of working due to the income wall |
| Sole proprietors / freelancers | In the direction of including them as the working middle- and low-income bracket |
| Pensioners (working elderly) | In the direction of also covering middle- and low-income elderly people with earned income |
| Residence-tax-exempt households | A design covering them through a cash benefit is being considered |
| High-income bracket | An income ceiling excluding them is expected to be set (the level is undecided) |
* The lines drawn for coverage (income ceiling, the household/individual unit, etc.) are undecided.
When does it start? The projected schedule
- May–June 2026 (now) In working-level talks between the ruling and opposition parties, there is broad agreement on a direction to "shelve the tax credit for the time being and start with the benefit first." An interim summary in June.
- Autumn 2026 (projected) Aiming to submit a bill to the extraordinary Diet session.
- Fiscal 2027 onward (target) Targeting full-scale introduction. The first benefit is seen as coming around the summer to autumn of 2027.
Because a refundable tax credit takes time to design and prepare, a proposal to first implement a consumption tax cut on food as a "bridge" until then is being discussed (the rate and period are under adjustment). Its positioning and content are fluid. For the overall 2026 reform, please also see the 2026 Tax Reform Summary.
How do you receive it? (the method of execution)
How you receive it is also at the examination stage, but the following directions have been indicated.
The system is not yet finalized, but registering a public-fund receiving account with My Number has been the premise for "automatic transfer" in past benefits too. Registering it may make future benefits smoother (registration is optional).
Common misunderstandings
The ¥40,000 is a leading proposal, not an official decision. The amount, coverage, and timing are all under discussion. Be careful of information claiming "decided" or "applications open," and always confirm with official announcements.
The fixed-amount tax cut only subtracted from taxes, and had the weakness of not readily reaching low-income earners who could not fully absorb it. The refundable tax credit differs fundamentally in that it supplements this with a cash benefit.
Summary
FAQ
When does the refundable tax credit start?
An interim summary is planned for June 2026, a bill is aimed at the extraordinary Diet session in autumn, and full-scale introduction is targeted for fiscal 2027. The first benefit is seen as coming around the summer to autumn of 2027, but these are all projections and not finalized.
How much will you get?
¥40,000 per person is reported as the leading proposal (said to be based on the annual consumption tax burden on food and the like). However, the amount is at the proposal stage and has not been officially decided.
How is it different from the fixed-amount tax cut?
The fixed-amount tax cut only subtracts a fixed amount from taxes, so people who pay little tax could not fully absorb it and received less benefit. The refundable tax credit pays out the portion that cannot be fully absorbed as a cash benefit, so it differs in that low-income people can also receive the full amount.
Who is covered?
Discussion is centered on the middle- and low-income working generation, in a direction that also covers people facing the income wall and residence-tax-exempt households. An income ceiling excluding the high-income bracket is expected to be set, but the level is undecided.
Are any procedures needed to receive it?
A proposal for an automatic benefit if you have registered a public-fund receiving account with your My Number, and a proposal linked to the tax return, are being considered. Because the method of execution is undecided, please check official announcements for confirmed information.
Reference links (sources)
This article was prepared as of June 2026 based on information from the following public bodies and news reports. Because the system is under discussion, please check official announcements for the latest and confirmed information.
- Cabinet Secretariat — National Conference on an All-Generation Social Security / Population Strategy (materials examining the refundable tax credit) (in Japanese)
- Nikkei — Refundable tax credit: government and ruling/opposition parties aim to design it at the National Conference (in Japanese)
- Refundable tax credit 2026: benefit first, income wall also covered (taxlabor.com) (in Japanese)
- The basis of the "¥40,000 per person proposal" and the difference from the fixed-amount tax cut (taxlabor.com) (in Japanese)
- The refundable tax credit: so how much, and who is covered? (MONEYIZM) (in Japanese)
* This article is intended to provide general information and is not tax or system advice. The refundable tax credit is a system under discussion, and its content may change. For the latest and confirmed information, please check the official announcements of the Cabinet Secretariat, the Ministry of Finance, and each ministry and agency.