Taxes and take-home pay on a ¥10 million annual income: a friendly, chart-based guide to how deductions work
"A ¥10 million annual income" sounds comfortable, but your actual take-home pay is roughly ¥7.2 million. The remaining ¥2.8 million or so is withheld as social insurance premiums, income tax, and residence tax. Using an employee with a ¥10 million annual income as a model, this article organizes one by one — with the flow of the calculation and charts — how the employment income deduction, income deductions (basic deduction, social insurance premium deduction), income tax, residence tax, and the mortgage loan credit combine to determine your take-home pay.
(1) Deductions that reduce income (the employment income deduction, the basic deduction, the social insurance premium deduction, etc.) = they shrink the "base amount" on which tax is calculated.
(2) Deductions that reduce tax directly (such as the mortgage loan credit = a tax credit) = they are subtracted from the calculated tax itself.
Even though both are called "deductions," they work in completely different ways. Once you grasp this, everything becomes much easier to understand.
Assumptions of the model case
- An employee with salary income only = ¥10 million annual income (gross)
- Single, no dependents (an example that does not use the spouse deduction or the dependent deduction)
- Kyokai Kenpo (Tokyo), under 40 (no long-term care insurance premium), with a bonus
- The system from 2025 (Reiwa 7) onward (after the revision of the basic deduction, etc.)
- Amounts are approximate estimates. They vary with the split of the bonus, the health insurance society, the region, and various deductions
* If you use the spouse deduction, the dependent deduction, the life insurance premium deduction, iDeCo, and so on, the tax will fall even further than in this example. Here, to make the mechanism easy to understand, we calculate with the minimum deductions.
First, the big picture: take-home pay and its breakdown on a ¥10 million income
A ¥10 million annual income (gross) breaks down roughly as follows (an approximation without the mortgage loan credit).
What is actually withheld from your hand is only the three items: social insurance premiums, income tax, and residence tax. The employment income deduction and the basic deduction are not "money taken away"; they are deductions that shrink your income when tax is calculated. In other words, they work in the direction of lowering the tax amount. We will look at each of them in turn from the next section.
Step 1: the employment income deduction (subtracted from your annual income; capped at ¥1.95 million)
Instead of "expenses," an employee has the employment income deduction, which is automatically subtracted from the annual income. However, the higher the income, the more it plateaus: once the annual income exceeds ¥8.5 million, the cap is a flat ¥1.95 million[NTA No.1410 (in Japanese)]. The 2025 (Reiwa 7) revision raised the minimum guaranteed amount from ¥550,000 to ¥650,000, but that is mainly for people with low-to-middle incomes; the ¥1.95 million cap for a ¥10 million income does not change[NTA Reiwa 7 revision (in Japanese)].
* In certain cases, such as having a dependent under 23, the "income amount adjustment deduction" (up to ¥150,000 for an annual income over ¥8.5 million) lowers your employment income further[NTA No.1411 (in Japanese)]. It is not used in this article's single-person model.
Step 2: income deductions (social insurance premium deduction + basic deduction)
What you can further subtract from your employment income are the income deductions. In the ¥10 million income model, the two that matter most are the following.
(1) Social insurance premiums (about ¥1.4 million, withheld) → fully deductible
Your own share of health insurance, employees' pension, and employment insurance comes to roughly ¥1.4 million at a ¥10 million income (a rough figure for Kyokai Kenpo Tokyo, under 40, bonus included). It is money actually withheld from your salary, yet the entire amount you paid can be subtracted from income as the "social insurance premium deduction."
The employees' pension plateaus at high incomes because the standard monthly remuneration is capped at ¥650,000, but it also applies to bonuses. Depending on the split of the bonus, the health insurance society you join, the region, and your age (a long-term care insurance premium is added from age 40), it generally ranges from ¥1.25 million to ¥1.5 million. Please check the exact amount on your pay slip, pension records, and so on.
(2) The basic deduction (¥580,000 for income tax / ¥430,000 for residence tax)
The basic deduction that anyone can take. The 2025 (Reiwa 7) revision reworked the basic deduction for income tax, and for total income over ¥6.55 million up to ¥23.5 million it is ¥580,000 (¥480,000 before the revision)[NTA Reiwa 7 revision (in Japanese)]. A ¥10 million annual income (¥8.05 million employment income) falls in this bracket. Meanwhile, the basic deduction for residence tax stays at ¥430,000 (no increase)[MIC (in Japanese)]. Note that the amount differs between income tax and residence tax.
Comparing the size of the deductions
Lining up the main deductions that apply at a ¥10 million income, the employment income deduction and the social insurance premium deduction are large, followed by the basic deduction.
Step 3: calculating income tax from taxable income
Subtracting the ¥1.98 million of income deductions from the ¥8.05 million of employment income gives the taxable income on which the tax rate is applied.
Income tax is progressive, and taxable income of ¥6.07 million falls in the "over ¥3.3 million up to ¥6.95 million = tax rate 20%, deduction amount ¥427,500" bracket[NTA No.2260 (in Japanese)].
×1.021 = income tax about ¥800,000
Step 4: residence tax (10% income levy + per-capita levy)
Residence tax is a flat 10% income levy on income plus a fixed per-capita levy (about ¥5,000). Because its basic deduction is ¥430,000, smaller than for income tax, the taxable income is a little larger than for income tax[MIC (in Japanese)].
Income levy: ¥6.22 million × 10% = about ¥620,000 (+ per-capita levy about ¥5,000)
Residence tax is paid in arrears. The residence tax on your 2025 income is paid from June 2026 through May 2027. This is why residence tax feels heavy in the year after a job change or retirement, when your income has dropped. The mechanism of residence tax is explained in detail in How residence tax works and is calculated.
Step 5: the mortgage loan credit (reduces tax "directly")
The deductions so far have been ones that "reduce income," but the mortgage loan credit is a "tax credit" subtracted from the calculated tax amount itself. Its distinctive feature is a large effect. In principle for 13 years, your year-end loan balance × 0.7% is subtracted from income tax (and any portion that cannot be fully absorbed, from residence tax)[MLIT (in Japanese)].
Shrinks income
The employment income deduction, the basic deduction, the social insurance premium deduction, etc. Because they reduce the income before the tax rate is applied, the tax-saving effect is "deduction amount × tax rate."
Subtracts tax directly
Such as the mortgage loan credit. Because the full amount is subtracted from the calculated tax, the same amount has a larger effect (the deduction amount is directly the tax reduction).
Income tax about ¥800,000 − ¥210,000 = about ¥590,000
* The mortgage loan credit has an income requirement, and applies to those with total income of ¥20 million or less (lowered from ¥30 million in the Reiwa 4 revision)[MOF (in Japanese)]. A ¥10 million annual income (total income ¥8.05 million) qualifies. The borrowing limit changes with the home's energy-efficiency performance and whether you are a child-rearing household. For details, see the Mortgage loan credit guide.
Simulation examples of the mortgage loan credit (by property type)
For the mortgage loan credit, the "borrowing limit" and "credit period" change with the property type (new build / pre-owned), energy-efficiency performance, and whether you are a child-rearing household. Using a model of moving in during 2025 (Reiwa 7), let's compare the approximate first-year credit amount (per year) for someone with a ¥10 million annual income[NTA No.1211-1 (in Japanese)].
| Property type | Performance (household) | Example loan amount | Credit-eligible limit | Credit period | First-year credit/year |
|---|---|---|---|---|---|
| New-build house | Meets energy-efficiency standards (general) | ¥35 million | ¥30 million | 13 years | about ¥210,000 |
| New-build house | ZEH level (child-rearing household) | ¥45 million | ¥45 million | 13 years | about ¥310,000 |
| New-build house | Certified long-term quality (child-rearing household) | ¥50 million | ¥50 million | 13 years | about ¥350,000 |
| Pre-owned condo | Meets energy-efficiency standards | ¥30 million | ¥30 million | 10 years | about ¥210,000 |
| Pre-owned condo | General (no performance certification) | ¥25 million | ¥20 million | 10 years | about ¥140,000 |
* The first-year credit amount is an approximation of "year-end balance (capped at the borrowing limit) × 0.7%." Any part of the loan exceeding the limit is not eligible for the credit (e.g., for a new-build energy-efficient general home, even a ¥35 million loan is eligible only up to the ¥30 million limit). "Child-rearing household / young married household" = there is a child under 19 as of year-end, or either spouse is under 40. The added limit is only for new builds and buy-and-resell; for pre-owned (existing homes) the credit period is 10 years with no add-on. A new build that does not meet the energy-efficiency standards is in principle ineligible (for those moving in from 2024).
The credit amounts above (¥140,000 to ¥350,000 a year) are all within the income tax (about ¥800,000) of a ¥10 million income. In other words, you can absorb the full amount with income tax alone. People with little income tax may be unable to use it fully and take part of it from residence tax (or fail to use it up), but the ¥10 million income bracket is one that can readily receive the full effect of the mortgage loan credit.
Each year's credit amount is that year's year-end balance × 0.7%. Because the balance decreases each year with repayment, the credit amount also falls little by little. The 13-year (10-year for pre-owned) total varies with the loan amount, interest rate, and repayment period, so for an accurate estimate please check with your financial institution's simulation or the Mortgage loan credit guide.
The flow of the calculation (overall diagram)
* Without the mortgage loan credit, the income tax is about ¥800,000. Take-home pay is a guide of about ¥7.18 million without the mortgage loan credit and about ¥7.39 million with it.
Summary: how to increase your take-home pay
The royal road to increasing take-home pay is either to "increase income deductions (iDeCo, the small enterprise mutual aid, various insurance premium deductions, dependents)" or to "use tax credits (the mortgage loan credit, the donation deduction of Furusato Nozei)." For example, iDeCo contributions are fully income-deductible, and with Furusato Nozei much of the donation is deducted for an effective burden of ¥2,000. A ¥10 million income is a bracket where deductions have a large effect, so combining the available programs is effective.
FAQ
How much is the take-home pay on a ¥10 million annual income?
Approximately ¥7.18 million (without the mortgage loan credit, single-person model). Social insurance premiums of about ¥1.4 million, income tax of about ¥800,000, and residence tax of about ¥620,000 are withheld. With dependents and various deductions, the take-home pay rises further.
Why does the employment income deduction stop at ¥1.95 million?
The employment income deduction's rate falls as income rises, and once income exceeds ¥8.5 million the cap becomes a flat ¥1.95 million. The 2025 revision raised the minimum guaranteed amount for low-to-middle incomes (from ¥550,000 to ¥650,000); the ¥1.95 million cap for high incomes does not change.
Why does the basic deduction differ between income tax and residence tax?
The 2025 revision raised the basic deduction for income tax to ¥580,000 (the bracket for a ¥10 million income), but the basic deduction for residence tax was kept at ¥430,000 because of its character as a "membership fee for the local community." Taxable income for residence tax is a little larger than for income tax.
How does the mortgage loan credit differ from an income deduction?
The mortgage loan credit is a "tax credit" subtracted directly from the calculated tax amount. It has a larger effect than an income deduction that reduces income, and year-end balance × 0.7% becomes the tax reduction directly (any portion that cannot be fully absorbed by income tax is also deducted in part from residence tax).
How does the mortgage loan credit differ between a new build and a pre-owned home?
New builds and buy-and-resell have a 13-year credit period with a larger borrowing limit, ¥30 million to ¥50 million depending on energy-efficiency performance (with an add-on for child-rearing households and young married households). Pre-owned (existing homes) have a 10-year credit period, with a limit of ¥30 million (energy-efficient, etc.) or ¥20 million (general) and no add-on for child-rearing households. For example, a new-build certified home (child-rearing household, ¥50 million loan) is a guide of about ¥350,000 in the first year, and a pre-owned general home (¥25 million loan) about ¥140,000.
Reference links (sources)
This article is based on the following official materials (neutral, primary sources). Tax rates and deduction amounts are subject to revision, so please check the latest before filing. Social insurance premiums and tax amounts are approximations that change with the assumptions.
- National Tax Agency — On the revision of the basic deduction for income tax, etc., under the Reiwa 7 tax reform (in Japanese)
- National Tax Agency No.1410 Employment income deduction (in Japanese)
- National Tax Agency No.2260 Income tax rates (quick table) (in Japanese)
- National Tax Agency No.1411 Income amount adjustment deduction (in Japanese)
- National Tax Agency No.1211-1 Special credit for housing loans, etc. (residence from Reiwa 4 onward) (in Japanese)
- Ministry of Internal Affairs and Communications — Individual residence tax (in Japanese)
- Ministry of Land, Infrastructure, Transport and Tourism — Mortgage loan tax reduction (in Japanese)
- Ministry of Finance — Expansion of the mortgage loan credit (Reiwa 7 tax reform) (in Japanese)
* This article is general information, not tax advice. Social insurance premiums and tax amounts vary with the assumptions. For accurate calculations and filing, please consult a tax office or a tax accountant.