# 2026 Tax Year: Japan's Basic Deduction Rises to ¥1,040,000 — What Freelancers Need to Know

> Japan's 2026 tax year brings major changes: basic deduction up to ¥1,040,000 and a minimum salary deduction of ¥740,000. Essential guide for freelancers based on NTA official information.

- URL: https://denpyo.com/en/blog/2026-tax-changes-basic-deduction
- Published: 2026-01-05
- Updated: 2026-11-07
- Language: en

> **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; amounts were updated in November 2026 for the 2026 tax year.

## Introduction

If you're a freelancer, sole proprietor, or side-job worker in Japan, mark your calendar: the 2026 tax year (the return you file from February 16 to March 15, 2027) brings the most significant tax reforms in three decades.

The headline change? **The basic deduction (基礎控除 / kiso kōjo) rises to a maximum of ¥1,040,000** — more than double the previous ¥480,000 flat rate (the 2025 tax year maximum was ¥950,000). 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. For the 2026 tax year, a salary-only earner pays no income tax up to ¥1.78 million.

In this article, we break down everything freelancers and expats need to know about the 2025 and 2026 tax reforms (applied to the 2026 tax year), 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 and 2026 tax reforms (令和7年度・令和8年度税制改正) apply to income earned in 2026 and filed during February-March 2027. Here are the key changes compared with the rules before 2025:

| Change | Previous | 2026 Tax Year |
| --- | --- | --- |
| Basic Deduction | Flat ¥480,000 | **Up to ¥1,040,000** (tiered by income) |
| Salary Income Deduction | Minimum ¥550,000 | **Minimum ¥740,000** (salary up to ¥2.2M; 2026–2027) |
| Dependent Deduction Requirement | Income ≤¥480,000 | **Income ≤¥620,000** |
| Spouse Deduction Requirement | Income ≤¥480,000 | **Income ≤¥620,000** |
| Working Student Deduction | Income ≤¥750,000 | **Income ≤¥890,000** |

**Source**: [Ministry of Finance Tax Reform Outline](https://www.mof.go.jp/tax_policy/)

(For reference, the 2025 tax year had a basic deduction of up to ¥950,000, a minimum salary income deduction of ¥650,000 and a ¥580,000 income limit for dependents and spouses.)

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:

| Total Income | Basic Deduction |
| --- | --- |
| ¥24 million or less | ¥480,000 |
| ¥24M - ¥24.5M | ¥320,000 |
| ¥24.5M - ¥25M | ¥160,000 |
| Over ¥25 million | ¥0 |

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

### 2.2 The New Tiered System (2026 Tax Year)

For the 2026 tax year, the basic deduction depends on income — and is significantly more generous for low and middle incomes:

| Total Income | Basic Deduction (2026 and 2027) |
| --- | --- |
| ¥4.89 million or less | **¥1,040,000** |
| ¥4.89M - ¥6.55M | **¥670,000** |
| ¥6.55M - ¥23.5M | **¥620,000** |
| ¥23.5M - ¥24M | ¥480,000 |
| Over ¥24 million | Decreases gradually |

**Key takeaways**:

- If your income is ¥4.89 million or less: **+¥560,000 deduction increase**

- If your income is ¥4.89M-¥6.55M: **+¥190,000 increase**

- Even high earners (¥6.55M-¥23.5M) get **+¥140,000**

\*The extra amounts (¥1,040,000 / ¥670,000) apply to the 2026 and 2027 tax years. From 2028, the basic deduction becomes ¥990,000 for total income up to ¥1.32 million and ¥620,000 above that (up to ¥23.5 million).

### 2.3 Real-World Examples

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

| Item | Previous | 2026 Tax Year | Difference |
| --- | --- | --- | --- |
| Basic Deduction | ¥480,000 | ¥1,040,000 | +¥560,000 |
| Impact on Taxable Income | — | -¥560,000 | — |
| Tax Savings (at 10% rate) | — | — | **~¥57,000** |

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

| Item | Previous | 2026 Tax Year |
| --- | --- | --- |
| Basic Deduction | ¥480,000 | ¥1,040,000 |
| Taxable Income | ¥800K - ¥480K = ¥320,000 | ¥800K - ¥1,040K = **¥0** |
| Result | Taxable | **Tax-free!** |

## 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.

| Salary Income | Deduction until 2024 | 2026 and 2027 |
| --- | --- | --- |
| ¥1.625M or less | ¥550,000 | **¥740,000** |
| ¥1.625M - ¥1.8M | Income × 40% - ¥100K | **¥740,000** |
| ¥1.8M - ¥2.2M | Income × 30% + ¥80K | **¥740,000** |
| ¥2.2M - ¥3.6M | Income × 30% + ¥80K | Income × 30% + ¥80K |
| ¥3.6M - ¥6.6M | Income × 20% + ¥440K | Income × 20% + ¥440K |
| ¥6.6M - ¥8.5M | Income × 10% + ¥1.1M | Income × 10% + ¥1.1M |
| Over ¥8.5M | ¥1.95M (cap) | ¥1.95M (cap) |

### What This Means for Side-Job Workers

Only the minimum was raised, so this helps only if your total salary for the year is ¥2.2 million or less. If your main job and side jobs together pay more than that, your salary income deduction is the same as before.

## 4. Dependent and Spouse Deduction Changes

### 4.1 Relaxed Income Requirements

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

| Deduction Type | Previous Requirement | 2026 Tax Year |
| --- | --- | --- |
| Dependent Deduction (扶養控除) | Income ≤¥480,000 | **Income ≤¥620,000** |
| Spouse Deduction (配偶者控除) | Income ≤¥480,000 | **Income ≤¥620,000** |
| Special Spouse Deduction (full amount) | Income over ¥480,000 up to ¥950,000 | **Income over ¥620,000 up to ¥950,000** |

### 4.2 Practical Impact

Your spouse can now earn a salary of up to **¥1.36 million** while you still qualify for the spouse deduction (¥1.03 million until 2024; ¥1.23 million in 2025).

### 4.3 Working Student Deduction

For students with part-time jobs:

| Item | Previous | 2026 Tax Year |
| --- | --- | --- |
| Income Requirement | ≤¥750,000 | **≤¥890,000** |
| Salary Equivalent | ≤¥1.3M | **≤¥1.63M** |

Students can now earn a salary of up to ¥1.63 million (¥330,000 more than before 2025) 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:**

| Annual Income | Deduction Increase | Income Tax Savings (approx., no other deductions) |
| --- | --- | --- |
| ¥1 million | +¥560,000 | ~¥27,000 |
| ¥3 million | +¥560,000 | ~¥57,000 |
| ¥5 million | +¥190,000 | ~¥39,000 |
| ¥8 million | +¥140,000 | ~¥33,000 |

### 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**

| Deduction | Previous | 2026 Tax Year |
| --- | --- | --- |
| Basic Deduction | ¥480,000 | ¥1,040,000 |
| Blue Form Special Deduction | ¥650,000 | ¥650,000 |
| **Total Deductions** | ¥1,130,000 | **¥1,690,000** |
| Taxable Income | ¥2,870,000 | **¥2,310,000** |

That's ¥560,000 less in taxable income = **approximately ¥57,000 in tax savings** (at a 10% rate).

## Summary

The 2026 tax year (filed in February–March 2027) extends Japan's most significant tax reform in about 30 years:

1. **Basic deduction expands to ¥1,040,000 max** — bigger benefits for low and middle incomes

1. **Minimum salary deduction rises to ¥740,000** — helps if your total salary is ¥2.2 million or less

1. **Dependent/spouse requirements relaxed** — family can earn a salary of up to ¥1.36M

1. **Stacks with Blue Form Special Deduction** — up to ¥1.69M 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.

### 🧮 Free Tax Calculators

See how these tax reforms affect you with our free tools:

- [→ Income Tax Calculator](https://denpyo.com/en/tools/income-tax-calculator) — Calculate your taxes with new deductions
- [→ Tax Savings Estimator](https://denpyo.com/en/tools/tax-savings-estimator) — See your tax savings potential
- [→ Blue vs White Form Comparison](https://denpyo.com/en/tools/blue-white-comparison) — Compare which filing method saves more