Even if you sell your own home (residence) and make a profit (capital gains), if you use the "¥30 million special deduction," up to ¥30 million of the profit is not taxed. Because in many sales the profit falls within ¥30 million, there are quite a few cases where this special provision makes the tax amount zero. However, there are requirements for it to apply, and points to note such as the restriction on combining it with the mortgage loan credit. This article organizes the requirements, calculation, cautions on combining, and the filing flow of the ¥30 million special deduction.
First, understand "capital gains"
The tax when you sell real estate is levied not on the sale price itself but on the profit (capital gains).
Acquisition cost = purchase price (for a building, after depreciation) + incidental costs at purchase. If the acquisition cost is unknown, you may use 5% of the sale price as the estimated acquisition cost. Transfer expenses = brokerage fees, revenue stamps, etc.
Main requirements of the ¥30 million special deduction
① The sale is of a house you live in (lived in) and its site
② You sell it by December 31 of the year that includes the day three years pass from the day you stopped living there
③ The buyer is not a spouse, parent, child, or other person in a special relationship
④ You have not received this special provision or the replacement (roll-over) special provision in the previous year or the year before that
The ¥30 million special deduction can be applied even if the holding period is short (even for a short-term transfer). Furthermore, if you have owned and lived there for more than 10 years, you can also combine a reduced tax rate on the remainder after the deduction (for the portion of taxable long-term capital gains of ¥60 million or less: income tax 10.21% + residence tax 4%)[National Tax Agency No.3305].
Calculation example
Capital gains = ¥55 million − ¥38 million = ¥17 million
Apply the ¥30 million special deduction → ¥17 million − ¥30 million = ¥0
* Only the portion of profit exceeding ¥30 million is taxed at the rate corresponding to the holding period (long-term 20.315% / short-term 39.63%)[National Tax Agency No.3202]. Whether the holding period is long-term or short-term is judged by whether it exceeds 5 years as of January 1 of the year of sale (note that it is not the actual number of years from the acquisition date).
Beware of combining it with the mortgage loan credit
If you use the ¥30 million special deduction (or the reduced tax rate / replacement special provision) on the sale, there is a period during which you cannot receive the mortgage loan credit on the new home. Specifically, if you have applied these special provisions in the year of move-in and a certain period before and after it, the mortgage loan credit cannot be used. You need to estimate and choose which is more advantageous: "tax saving on the sale profit" or "the loan credit on the new home." (See the Guide to the mortgage loan credit.)
The filing flow
The ¥30 million special deduction applies only once you file a tax return. A return is required even if the deduction makes the tax amount zero. In the year after the sale, between February 16 and March 15, you file with the capital gains breakdown statement, a copy of the sale contract, materials from the time of acquisition, and the like attached.
FAQ
If I sell my own home and make a profit, am I always taxed?
If you use the ¥30 million special deduction, up to ¥30 million of the profit is not taxed. In many sales the profit falls within ¥30 million and the tax amount becomes zero, but a tax return is required for it to apply.
Can I use it even for a house I no longer live in?
It can be applied if you sell by December 31 of the year that includes the day three years pass from the day you stopped living there. Note that you can no longer use it once that passes.
Is a tax return needed even if the tax amount is zero?
Yes. The ¥30 million special deduction is a special provision that applies through filing a tax return, so even when the deduction makes it zero, it does not apply unless you file.
Can I use both this and the mortgage loan credit on the new home?
If you apply this special provision in the year of move-in and a certain period before and after it, you cannot use the mortgage loan credit on the new home. You need to estimate which is more advantageous and choose.
Summary
Reference links (sources)
This article is based on the following published materials of the National Tax Agency (neutral, primary sources). Requirements and tax rates are subject to revision, so please confirm the latest content before selling or filing.
- National Tax Agency No.3302 Special provisions when you sell your own home (in Japanese)
- National Tax Agency No.3305 The reduced-tax-rate special provision when you sell your own home (in Japanese)
- National Tax Agency No.3202 Tax rates on capital gains (long-term / short-term) (in Japanese)
* This article is general information, not tax advice. For individual judgments, please confirm with a tax office or a tax accountant.