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Tax deduction options for foreigners living in Japan?

TokyoJoeblow

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I realize that there are various types of income tax deductions, but my Japanese friend mentioned about income deduction and tax credit.

I realize that how much you pay in taxes is based on how much you earned working the previous year, but I know about the double tax situation for foreigners which depends on where the foreigner is from (in my case the US).

My Japanese friend mentioned that in order to avoid being taxed double, you have to pay taxes to your home country and declare it to Japan, where it will be subtracted from the Japanese tax?

I would rather just pay the Japan tax directly and not worry about paying my taxes in the US. I realize that the US taxes its overseas citizens even if they are not working in the US because they are assumed to be earning overseas. I guess most people from the US living abroad pays their US taxes as well?

I lived and worked in China for like 4 years and didn't pay my US taxes at all. I never had an issue with later returning to the US to work there for a couple years.

Anyway, is there anyone else on here from the US that knows more about this?

This is my first time paying taxes in Japan.
 
It's usually the other way around. You pay your Japanese taxes directly, and when you pay your US taxes you declare that you live overseas for more than a certain number or days a year, and you get an income exclusion. IRS doesn't list what it was for 2016, but for 2015 you could exclude all income under $100,800. Once you are in Japan for a certain number of years, Japan requires that you start paying taxes on your worldwide income, so if you have investments in the States etc, you'd have to pay on those.

Depending on your situation, I'd certainly read the IRS's website or consult a tax professional rather than trusting some bozo on an anonymous website.
 
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Americans residing in Japan (or any other country outside the US) on their income over approximately $100K USD - the amount varies year to year.

If you are under this amount, you're still supposed to file, but you won't owe any taxes. If you're over that amount, you can claim foreign tax paid against your US taxes, and will generally end up owing very little, if anything at all.

With current exchange rates, unless you made more than about twelve million, you're not going to be liable for US taxes - and if you did, you'd be the first English teacher I've ever met pulling in hat kind of cash.

> My Japanese friend mentioned that in order to avoid being taxed double, you have to pay taxes to your home country and declare it to Japan, where it will be subtracted from the Japanese tax?

Your friend has it backwards. You pay your taxes in Japan (your country of residence) and declare the paid taxes in your home country if you are required to report income there. Most countries have treaties to avoid double taxation.
 
Americans residing in Japan (or any other country outside the US) on their income over approximately $100K USD - the amount varies year to year.

If you are under this amount, you're still supposed to file, but you won't owe any taxes. If you're over that amount, you can claim foreign tax paid against your US taxes, and will generally end up owing very little, if anything at all.

With current exchange rates, unless you made more than about twelve million, you're not going to be liable for US taxes - and if you did, you'd be the first English teacher I've ever met pulling in hat kind of cash.

> My Japanese friend mentioned that in order to avoid being taxed double, you have to pay taxes to your home country and declare it to Japan, where it will be subtracted from the Japanese tax?

Your friend has it backwards. You pay your taxes in Japan (your country of residence) and declare the paid taxes in your home country if you are required to report income there. Most countries have treaties to avoid double taxation.

Are you sure about all of this? Unless we get an opinion from what's his name (what the hell was his name?) we can't be sure. Plus, don't different localities have different tax rates.

I just couldn't resist.....
 
how much you earned working the previous year
You have income? I thought you survived by pimping yourself out to 80+ year-old bar owners. :bag:
 
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I realize that there are various types of income tax deductions, but my Japanese friend mentioned about income deduction and tax credit.

I realize that how much you pay in taxes is based on how much you earned working the previous year, but I know about the double tax situation for foreigners which depends on where the foreigner is from (in my case the US).

My Japanese friend mentioned that in order to avoid being taxed double, you have to pay taxes to your home country and declare it to Japan, where it will be subtracted from the Japanese tax?

I would rather just pay the Japan tax directly and not worry about paying my taxes in the US. I realize that the US taxes its overseas citizens even if they are not working in the US because they are assumed to be earning overseas. I guess most people from the US living abroad pays their US taxes as well?

I lived and worked in China for like 4 years and didn't pay my US taxes at all. I never had an issue with later returning to the US to work there for a couple years.

Anyway, is there anyone else on here from the US that knows more about this?

This is my first time paying taxes in Japan.

US people do not have to pay US taxes for three years unless your income threshold peaks a certain level. You are best served by seeing an accountant who speaks English and knows the rules for gaijin.
 
US people do not have to pay US taxes for three years unless your income threshold peaks a certain level. You are best served by seeing an accountant who speaks English and knows the rules for gaijin.

Three year exemption? No.

It's based purely on residency and income level. Be careful....
 
Three year exemption? No.

It's based purely on residency and income level. Be careful....

There is a treaty that states if you make less than X then you don't have to pay Federal taxes. If you're US residency is in a state that has a state income tax you are still responsible for paying tax in that state. If you live overseas you still have to file your tax returns. I know at least 1-2 people living here in Japan who fail to file in the US. I am sure there are a lot more who just don't understand what the law requires them to do.
 
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There is also a little known trick : if you get a new wooden house (like a mountain chalet ) built you can deduct depreciation on it. And it can be anywhere (not just in Japan). I know a foreigner who pays basically no tax thanks to this.
 
I'm still behind on various taxes. I wound up filing my other Japan taxes way too late last year due to numerous issues, but still got a good chunk in refunds.
 
There is also a little known trick : if you get a new wooden house (like a mountain chalet ) built you can deduct depreciation on it. And it can be anywhere (not just in Japan). I know a foreigner who pays basically no tax thanks to this.

You can of course deduct depreciation on every kind of building, the difference with wood frame constructed houses is you can depreciate them way faster. But of course if you ever intent to sell that property you will then be hit by the capital gains taxes as you have just claimed the property has no value anymore :eek:.
 
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You can of course deduct depreciation on every kind of building, the difference with wood frame constructed houses is you can depreciate them way faster. But of course if you ever intent to sell that property you will then be hit by the capital gains taxes as you have just claimed the property has no value anymore :eek:.
True... but you can also burn it down and claim the insurance money (just kidding)
 
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It annoys me that the federal government even taxes overseas income to begin with. My understanding is the United States is one of the very few countries hat imposes that burden. For example, the United Kingdom apparently does not tax its expats.

The foreign earned income exclusion certainly helps, but it would be a lot easier if Americans working abroad simply didn't have to worry about I.R.S.
 
It annoys me that the federal government even taxes overseas income to begin with. My understanding is the United States is one of the very few countries hat imposes that burden. For example, the United Kingdom apparently does not tax its expats.

The foreign earned income exclusion certainly helps, but it would be a lot easier if Americans working abroad simply didn't have to worry about I.R.S.

...and with the FATCA law they even force foreign banks to declare all accounts of US citizens living abroad. This coming from the country where the new president bragged about not paying federal taxes. Funny huh?
 
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Yes, that law has made it difficult for many ordinary Americans living overseas to open freaking bank accounts. Some banks don't want to bother with the compliance issues.
 
Yes, that law has made it difficult for many ordinary Americans living overseas to open freaking bank accounts. Some banks don't want to bother with the compliance issues.
And for good measure they also ask brokers, insurers, asset managers etc to comply. Its a mess of a law giving headaches to millions of people worldwide , employees of local financial institutions (who now feel they have to do the IRS job for free), as much as americans living abroad.
 
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After the 3 year mark, it still depends on your state laws, and there are also things about how long you're in the US per year, etc. California, for example, doesn't have any exemptions. That's why according to the IRS, I live in Arizona, they let me exempt up to 60k a year. =P
 
Ok, so today I received a 源泉徴収 (tax withholding paper) from one of my employers from last year. Now that it isn't my first year in Japan, I have to pay taxes. My current employer explained more about things and showed me where the tax office is that I need to go to in the near future.

My question is do I need to bring my 源泉徴収 along with 年末確定申告(Year-end tax return) and 年末調整(Year-end adjustment) papers as well when I go to the tax office or will the 源泉徴収 be enough with regard to my previous/current employers?

I only ask because my employers only provided me with 源泉徴収 both last year and this year.

Do I need to specifically request both the 年末確定申告 and 年末調整 from my employers or are these not required/taken care of by the employer?
 
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年末調整 (Year-end adjustment) is normally done by your employer, before december end, if you earnt less than JPY 20mn.
You dont need to file a tax return unless you earnt more than JPY 20mn , or there are some deductions
(or non-salary revenues) that were not taken into account in the 年末調整. In this case yes you need to bring the documents prepared by your employer in addition to documents related to the additional deductions you want to claim (eg receipts for charity donations) or non-salary revenues you need to declare.
But you'd better download the 2016 tax guide in english from the NTA website instead of asking on a mostly sex-related forum! (-:
 
It sounds like you have several employers so I am wondering if they even did the year-end adjustment for you? Most probably not so you need to file the report.

And by the way, you are obliged to pay your taxes from the moment you move to Japan; it doesn't start from your second year.
 
It sounds like you have several employers so I am wondering if they even did the year-end adjustment for you? Most probably not so you need to file the report.

And by the way, you are obliged to pay your taxes from the moment you move to Japan; it doesn't start from your second year.

I guess I will find out the details of the situation at the tax office. I will talk with my employers and previous employers before I possibly walk into some tax shit storm lol.
 
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My current employer mentioned that if I pay for me and my wife's health insurance and pensions, then I should qualify for tax deductions?

Has his been the case for anyone on here?
 
My current employer mentioned that if I pay for me and my wife's health insurance and pensions, then I should qualify for tax deductions?

Has his been the case for anyone on here?

You still haven't read the booklet, have you? :p

It is called "2016 INCOME TAX AND SPECIAL INCOME TAX FOR RECONSTRUCTION GUIDE FOR ALIENS". Now go and download it from https://www.nta.go.jp/tetsuzuki/shinkoku/shotoku/tebiki2016/pdf/43.pdf before Sigourney Weaver comes and kills you.

Because it has the answers you are looking for, for example it says: "Deduction for social insurance premiums: If you have paid social insurance premiums, such as premiums for health insurance , National Health Insurance, social medical insurance for the old-aged, Nursing-care Insurance and National pension".
 
Ok, so today I received a 源泉徴収 (tax withholding paper) from one of my employers from last year. Now that it isn't my first year in Japan, I have to pay taxes. My current employer explained more about things and showed me where the tax office is that I need to go to in the near future.

My question is do I need to bring my 源泉徴収 along with 年末確定申告(Year-end tax return) and 年末調整(Year-end adjustment) papers as well when I go to the tax office or will the 源泉徴収 be enough with regard to my previous/current employers?

I only ask because my employers only provided me with 源泉徴収 both last year and this year.

Do I need to specifically request both the 年末確定申告 and 年末調整 from my employers or are these not required/taken care of by the employer?

Bring everything you have with you to the tax office, they'll help you sort it out. The tax agency employees are not like the IRS here, they're actually quite helpful.