2026 Tax Filing: Japan's Basic Deduction Rises to ¥950,000 — What Freelancers Need to Know

Disclaimer: This article provides general information only and does not constitute tax or legal advice. Please consult a qualified tax professional (税理士 / zeirishi) for your specific situation. Information is current as of January 2026.

Introduction

If you're a freelancer, sole proprietor, or side-job worker in Japan, mark your calendar: the tax filing period starting February 16, 2026 brings the most significant tax reforms in three decades.

The headline change? The basic deduction (基礎控除 / kiso kōjo) is expanding to a maximum of ¥950,000 — nearly double the previous ¥480,000 flat rate. This is the first major revision since 1995.

You may have heard about Japan's infamous "¥1.03 million wall" (103万円の壁) — the income threshold that triggers various tax implications. In 2026, that wall is shifting significantly.

In this article, we break down everything freelancers and expats need to know about the 2025 tax reform (applied to 2026 filing), based on official NTA and Ministry of Finance information.

What You'll Learn

• How the new tiered basic deduction system works

• Salary income deduction increases (good news for side-job workers)

• Relaxed requirements for dependent and spouse deductions

• Specific strategies for freelancers to maximize tax savings

1. What's Changing in 2026? The Big Picture

The 2025 tax reform (令和7年度税制改正) applies to income earned in 2025 and filed during February-March 2026. Here are the key changes:

Source: Ministry of Finance Tax Reform Outline

The bottom line: these changes will reduce the tax burden for most taxpayers, with the biggest benefits going to low-to-middle income earners.

2. The New Basic Deduction System Explained

2.1 How It Used to Work

Previously, the basic deduction was straightforward:

For the vast majority of freelancers, this meant a flat ¥480,000 deduction.

2.2 The New Tiered System (2026 Filing Onwards)

Starting with 2026 tax filing, the basic deduction becomes income-dependent — and significantly more generous for lower incomes:

Key takeaways:

• If your income is ¥1.32 million or less: +¥470,000 deduction increase

• If your income is ¥3.36M-¥4.89M (common for freelancers): +¥200,000 increase

• Even high earners (¥6.55M-¥23.5M) get +¥100,000

2.3 Real-World Examples

Example 1: Freelancer with ¥4M revenue, ¥3M income

Example 2: Side-job income of ¥1M (¥800K net)

3. Salary Income Deduction Increases

If you have any employment income (from a part-time job, side gig, or even contract work classified as employment), you benefit from the salary income deduction (給与所得控除) increase.

What This Means for Side-Job Workers

If you work a main job plus side gigs, the extra ¥100,000 buffer in salary deductions gives you more room before your side income becomes taxable.

4. Dependent and Spouse Deduction Changes

4.1 Relaxed Income Requirements

The income threshold for claiming family members as dependents has been raised:

4.2 Practical Impact

Your spouse can now earn ¥200,000 more per year while you still qualify for the deduction.

4.3 Working Student Deduction

For students with part-time jobs:

Students can now work ¥200,000 more annually and still receive the working student deduction.

5. Special Considerations for Freelancers

5.1 Why This Matters More for You

Unlike salaried employees who get the automatic salary income deduction, freelancers don't have that built-in buffer. The basic deduction expansion is therefore particularly valuable for self-employed workers.

Estimated Tax Savings by Income Level:

5.2 Stacking with Blue Form Special Deduction

The basic deduction expansion can be combined with the Blue Form Special Deduction (青色申告特別控除), which offers up to ¥650,000.

Example: Freelancer with ¥4M annual income

That's ¥200,000 less in taxable income = approximately ¥40,000 in tax savings.

Summary

The 2026 tax filing season brings Japan's most significant tax reform in approximately 30 years:

1. Basic deduction expands to ¥950,000 max — bigger benefits for lower incomes

1. Salary deduction increases by ¥100,000 — helps side-job workers

1. Dependent/spouse requirements relaxed — family can earn ¥200K more

1. Stacks with Blue Form Special Deduction — up to ¥1.33M total deductions

For freelancers and sole proprietors, solid expense management and proper tax filing preparation will help you capture the full benefit of these reforms.