If the sale is completed before returning to Japan

Since all tax procedures are completed in the U.S., there is no need to file a separate return in Japan. We believe this is the simplest and safest approach.

If the sale is completed after returning to Japan

You will need to handle tax procedures in both the U.S. and Japan.

You May Qualify for the ¥30 Million Special Deduction

In Japan, if you sell a home you previously resided in and realize a profit, you may be eligible for a special deduction of up to ¥30 million which can exempt that profit from taxation. However, you will need documentation, such as utility bills, to prove actual residency in that home.

Potentially Lower Tax Rates

If you have owned the home for more than five years as of January 1 of the sale year, the combined tax rate (income tax + inhabitant tax) will be slightly lower at 20.315%.

You Can Deduct U.S. Taxes Paid

You can use the Foreign Tax Credit to deduct U.S. taxes paid from your Japanese tax liability.

Be Aware of Calculation Differences Between the U.S. and Japan

Certain U.S. tax rules, such as “step-up in basis” under community property laws, are not applicable for tax calculations in Japan, so caution is required.