Year-End Adjustment vs Tax Return: Complete Guide 2026 | Japan Employees
Year-end adjustment vs tax return (kakuteishinkoku) explained. When you need both, 2026 changes, and side-job implications. Essential for Japan employees.
Disclaimer: This article is for general information purposes only and does not constitute tax or legal advice. Please consult a qualified tax professional for your specific situation. Information is current as of January 2026. Disclosure: This article is published on the Denpyo blog. Denpyo provides receipt management and expense tracking services.
Introduction
"I already had year-end adjustment at work - do I still need to file a tax return?"
Every year from December to March, many employees face this question. Especially those with side jobs, high medical expenses, or new home mortgages may find that year-end adjustment alone is not enough.
This article thoroughly explains the differences between year-end adjustment and tax return filing, who needs to do which, and provides the latest 2026 updates.
Fundamental Differences Between Year-End Adjustment and Tax Return
What is Year-End Adjustment?
Year-end adjustment (nenmatsu chosei) is a tax settlement procedure performed by employers on behalf of employees.
| Item | Details |
|---|---|
| Performed by | Employer |
| Target | Salary earners (employees, part-timers) |
| Timing | Every December (through January) |
| Eligible deductions | Basic, spouse, dependent, life insurance, social insurance deductions |
| Procedure | Simply submit documents to employer |
How it works:
- Estimated tax withheld monthly from salary
- Exact annual tax calculated at year-end
- Over/underpayment adjusted in December paycheck (refund or additional collection)
What is Tax Return Filing?
Tax return filing (kakutei shinkoku) is a tax declaration procedure performed by individuals themselves at the tax office.
| Item | Details |
|---|---|
| Performed by | Individual (yourself) |
| Target | Self-employed, freelancers, certain employees |
| Timing | February 16 - March 15 annually |
| Eligible deductions | All deductions (including medical, donation, casualty loss not available through year-end adjustment) |
| Procedure | Submit declaration to tax office |
Comparison Table: Year-End Adjustment vs Tax Return
| Comparison | Year-End Adj. | Tax Return |
|---|---|---|
| Who handles it | Employer | You |
| Mandatory? | Employer's duty | Depends |
| Income covered | Salary only | All income |
| Filing period | December | Feb-Mar |
| Medical deduction | ❌ Not available | ✅ Available |
| Hometown tax | △ One-stop only | ✅ Full amount |
| Mortgage deduction | △ Year 2+ | ✅ Required year 1 |
| Side income | ❌ Not available | ✅ Required |
| Stock/FX gains | ❌ Not available | ✅ Available |
7 Cases Where Tax Return is Needed Even After Year-End Adjustment
Even employees who completed year-end adjustment may need to file a tax return or can receive a refund through tax return filing in the following cases.
1. Medical Expenses Exceeded 100,000 Yen
If your annual medical expenses exceed 100,000 yen (or 5% of income), you can claim a medical expense deduction.
Medical Expense Deduction Formula:
Deduction = Medical expenses paid - Insurance reimbursements - 100,000 yen (or 5% of income)Eligible Medical Expenses:
- Hospital and dental treatment
- Prescription medicine
- Transportation to hospital (public transit)
- Hospitalization costs
- Nursing care services
Estimated Refund Amounts:
- 200,000 yen expenses → ~15,000 yen refund
- 500,000 yen expenses → ~60,000 yen refund
👉 Medical Expense Deduction Guide
2. Donated to 6+ Municipalities via Furusato Nozei
The one-stop special provision is limited to 5 municipalities. If you donated to 6 or more, tax return filing is required.
Important Notes:
- Filing tax return invalidates one-stop applications
- Must re-declare all donations in tax return
👉 Furusato Nozei Tax Return Guide
3. First Year of Mortgage Deduction
The housing loan deduction (special deduction for housing acquisition):
- Year 1: Tax return required
- Year 2+: Year-end adjustment OK
Deduction Amount: Up to 0.7% of loan balance (new construction)
4. Side Job Income Exceeded 200,000 Yen
If you have side income besides your main salary:
| Side Income | Tax Return |
|---|---|
| 200,000 yen or less | Not required (but resident tax filing needed) |
| Over 200,000 yen | Required |
Side Job Types and Income Categories:
- Freelance → Business or miscellaneous income
- Part-time job → Salary income
- Stock investment → Capital gains
- Rental income → Real estate income
5. Salary Exceeds 20 Million Yen
If your annual salary exceeds 20 million yen, you are ineligible for year-end adjustment and must file a tax return.
6. Receiving Salary from 2+ Employers
If you receive salary from multiple companies:
| Condition | Tax Return |
|---|---|
| Secondary salary 200,000 yen or less | Not required |
| Secondary salary over 200,000 yen | Required |
7. Resigned Mid-Year Without New Employment
If you resigned mid-year and are unemployed as of December 31:
- Year-end adjustment not performed
- Tax settlement through tax return required
Refund Possibility: If too much tax was withheld from salary before resignation, you are likely eligible for a refund.
5 Cases Where Filing Gets You Money Back (Optional)
Even when not mandatory, there are cases where filing a tax return gets you money back.
1. Using Self-Medication Tax System
Even if medical expenses are under 100,000 yen, you can claim a deduction if you purchased designated OTC medicines totaling 12,000 yen or more annually.
2. Suffered Disaster or Theft Damage
You can claim a casualty loss deduction for losses from disasters, theft, or embezzlement.
3. Made Large Donations
Besides Furusato Nozei, donations to certified NPOs, political donations, and donations to specified public interest corporations qualify for donation deductions.
4. Stock Investment Losses
Capital loss carryforward: Stock investment losses can be carried forward up to 3 years to offset future gains.
5. Want Dividend Income Refund
Choosing aggregate taxation may allow you to receive dividend deductions (advantageous for those with taxable income of 6.95 million yen or less).
Important 2026 Changes
Expansion of Basic Deduction
Starting from 2025 income (2026 filing), the basic deduction will be significantly expanded.
| Total Income | Previous | 2025+ New |
|---|---|---|
| 23.5M yen or less | 480,000 | 580,000-950,000 |
| 23.5M-24M | 480,000 | 480,000 |
| 24M-24.5M | 320,000 | 320,000 |
| 24.5M-25M | 160,000 | 160,000 |
| Over 25M | 0 | 0 |
From the "1.03 Million Yen Wall" to the "1.23 Million Yen Wall"
Employment income deduction (550,000 yen) + new basic deduction (680,000 yen) = No income tax up to 1.23 million yen.
Tax Return Filing Period
2026 Tax Return Period:
- Income tax: February 16 (Mon) - March 16 (Mon), 2026
- Consumption tax: Until March 31 (Tue), 2026
- Refund filing: Available from January 1, 2026
Cases Where Both Year-End Adjustment AND Tax Return Are Needed
In the following cases, you need both year-end adjustment AND tax return filing:
Case 1: Employees with Side Job Income
Year-end adjustment (salary) + Tax return (add side income)Case 2: Employees Wanting Medical Expense Deduction
Year-end adjustment (basic deductions) + Tax return (add medical deduction)Case 3: First Year of Mortgage Deduction
Year-end adjustment (basic deductions) + Tax return (first-year mortgage deduction application)Common Mistakes and Cautions
Mistake 1: "I Did Year-End Adjustment, So No Tax Return Needed"
❌ Wrong
Deductions not available through year-end adjustment (like medical expenses) can only be claimed through tax return filing. You may be missing out on refund opportunities.
Mistake 2: "Side Income Under 200,000 Yen Means No Filing Required"
❌ Wrong
Even if tax return is not required, resident tax declaration is still necessary. Submit a resident tax form to your local municipality.
Mistake 3: "I Used One-Stop Special Provision, So I'm Fine"
⚠️ Caution
Filing a tax return automatically invalidates one-stop special provisions. If filing for medical expense deductions, you must include all Furusato Nozei donations in your tax return.
Mistake 4: "Refund Filing Has No Deadline"
⚠️ Caution
Refund claims must be filed within 5 years. You can file retroactively for up to 5 years, but earlier years are barred by statute of limitations.
Documents Required for Tax Return Filing
Required for Everyone
| Document | How to Obtain |
|---|---|
| Withholding slip | From employer |
| My Number card | From municipality |
| Bank account for refund | Account in your name |
Additional Documents for Claiming Deductions
| Deduction Type | Required Documents |
|---|---|
| Medical expenses | Receipts, itemized statement |
| Furusato Nozei | Donation receipt certificate |
| Mortgage | Loan balance cert., registry cert., purchase contract |
| Social insurance | Deduction certificate (national pension, etc.) |
| Life insurance | Deduction certificate |
Tips for Efficient Tax Filing
1. Organize Receipts Regularly
Filing expense and medical receipts monthly makes tax return preparation much easier.
Using Denpyo: Just snap photos of your receipts and they're automatically organized. Expense summaries available with one click. → Start Organizing Expenses with Denpyo Now
2. Use e-Tax
Benefits of e-Tax (electronic filing):
- File 24/7 anytime
- Faster refunds (~3 weeks)
- No need to attach withholding slip
- Some deduction certificates not required
3. Use the NTA Online Filing Tool
The National Tax Agency's "Tax Return Preparation Corner" offers:
- Just follow on-screen guidance
- Auto-calculation prevents errors
- Submit directly via e-Tax
Summary
| Your Situation | Required Procedure |
|---|---|
| Employee with few deductions | Year-end adjustment only |
| Employee with high medical expenses | Year-end adj. + Tax return |
| Employee with side job | Year-end adj. + Tax return |
| Employee, first year of mortgage | Year-end adj. + Tax return |
| Freelancer/Self-employed | Tax return only |
| Resigned mid-year | Tax return only |
Key Points:
- Year-end adjustment is a "simplified tax settlement" done by your employer
- Tax return is a "complete tax declaration" you do yourself
- Deductions not available through year-end adjustment must be claimed via tax return
- Many people need both
The tax return deadline is March 16, 2026. Prepare early to ensure you receive your refund!
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