"Is pension income taxed too?" Public pensions (old-age pensions) are taxable as "miscellaneous income" under tax law. However, there is a large deduction called the public pension deduction, so no tax is charged up to a certain amount. Also, if your pension income is below a certain level, you do not need to file a tax return. This article organizes, for both current and future recipients, how tax on pensions is calculated, the lines for when a tax return is required or not, and cases where filing is actually to your advantage.
Public pensions are taxed as "miscellaneous income"
Public pensions such as the old-age basic pension and the old-age employees' pension are, under tax law, subject to income tax and residence tax as "miscellaneous income relating to public pensions and the like"[National Tax Agency No.1600]. On the other hand, disability pensions and survivors' pensions are tax-exempt and are not taxed[National Tax Agency No.1605].
Tax is charged on what remains after further subtracting the basic deduction, spousal deduction, social insurance premium deduction, medical expense deduction, and the like from this miscellaneous income.
The public pension deduction (it changes at age 65)
The public pension deduction is determined by age and pension income, and it is more generous for those aged 65 and over (minimum amount where income other than pensions is ¥10 million or less).
| Age | Minimum public pension deduction | Miscellaneous income is zero up to (guide) |
|---|---|---|
| Under 65 | ¥600,000 | Up to ¥600,000 of pension income |
| 65 and over | ¥1.1 million | Up to ¥1.1 million of pension income |
As income rises, the deduction also increases in stages. In addition, everyone has a basic deduction (a minimum of ¥580,000 for income tax 〈after the 2025 revision〉), so for those aged 65 and over, no income tax is charged as long as pension income is up to a certain amount.
Taxable income = ¥700,000 − basic deduction (¥580,000) − (social insurance premium deduction, etc.) → the remainder is taxed at 5%
Do you need to file? The "filing-exemption for pensioners"
People who meet both of the following do not need to file an income tax return.
① The total amount of public pension income is ¥4 million or less (and subject to withholding)
② Income other than miscellaneous income relating to public pensions and the like is ¥200,000 or less
The filing-exemption is only about "you don't have to." In cases like the following, filing may get you a refund.
・You want to use the medical expense deduction, the life insurance premium deduction, or the earthquake insurance premium deduction
・You did Furusato Nozei
・A dependent family member increased during the year, etc.
* Also note that even when a tax return is not required, a residence tax declaration may still be necessary.
Withholding from pensions and the "Declaration of Dependents, etc."
Income tax is withheld from pensions above a certain amount. If you submit the "Declaration of Dependents, etc." sent to you by the Japan Pension Service, the various deductions are reflected and the amount withheld becomes appropriate (if you do not submit it, the tax rate can be higher)[Japan Pension Service]. Long-term care insurance premiums, National Health Insurance premiums, and the medical insurance premiums for those in the late-stage elderly system are also deducted at source from pensions.
When you receive a pension while working
For those who receive a pension while earning a salary, both employment income and the miscellaneous income from the pension are taxable. If income other than pensions exceeds ¥200,000, a tax return becomes necessary. Note that iDeCo and lump-sum retirement allowances fall under retirement income and a separate calculation, and adjusting the timing of receipt is the key point (see Tax on retirement allowances and iDeCo).
FAQ
Is a pension taxed?
Old-age pensions are taxable as miscellaneous income, but because there is the public pension deduction (a minimum of ¥1.1 million for those aged 65 and over) and the basic deduction, no income tax is charged as long as income is up to a certain amount. Disability pensions and survivors' pensions are tax-exempt.
Does a pension recipient need to file a tax return?
If public pension income is ¥4 million or less and income other than pensions is ¥200,000 or less, no tax return is required. However, if you want a refund through the medical expense deduction or Furusato Nozei, filing is advantageous.
Even if a tax return is not required, is a residence tax declaration needed?
In cases such as wanting to reflect income deductions, a residence tax declaration may be necessary. Please check with the municipality where you live.
What about tax if I receive a pension while working?
Both employment income and the miscellaneous income from the pension are taxable. If income other than pensions exceeds ¥200,000, a tax return becomes necessary.
Summary
Reference links (sources)
This article is based on materials from the following public bodies (neutral, primary sources). Since deduction amounts and requirements are revised, please check the latest content before filing.
- National Tax Agency No.1600 Taxation relating to public pensions and the like (in Japanese)
- National Tax Agency No.1605 Are survivors' pensions and disability pensions taxed? (in Japanese)
- National Tax Agency The elderly and tax (pensions and tax) (in Japanese)
- Japan Pension Service Withholding from pensions and the Declaration of Dependents, etc. (in Japanese)
* This article is general information, not tax advice. For individual decisions, please confirm with a tax office or a tax accountant.