What is the "¥1.03M wall" → "¥1.23M wall"? The income wall's change explained

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This is an English translation of our Japanese article. Rules and figures may change; the Japanese version and official sources are authoritative.

What is an "income wall"?

A "¥X wall" refers to the ceiling that a family member's (a spouse's, child's, or parent's) annual income must not exceed in order for them to be claimed under the dependent deduction or spousal deduction.

Conditions for claiming a dependent (income tax)
The total income of the family member you support must be at or below the basic deduction amount

If they have only employment income: total income = annual salary − employment income deduction (minimum amount)

→ The "wall" income = basic deduction amount + minimum employment income deduction

When this "wall" is exceeded, the deductions available to the supporting side (the head of household) shrink, and their income tax and residence tax rise. Conversely, if the person stays inside the wall, they can be claimed as a dependent for the full deduction.

How much do taxes rise when someone leaves dependent status?

Example: an employee earning ¥6 million who loses the spousal deduction (¥380,000)
Deduction lost¥380,000 (spousal deduction)
Increase in income tax (20% rate)+¥76,000
Increase in residence tax (10% rate)+¥38,000
Annual increase in tax burdenabout ¥114,000
Whether or not someone leaves dependent status can change the whole household's take-home pay by more than ¥100,000 a year.

Why it changed from ¥1.03 million to ¥1.23 million

The "wall" income is determined by the total of the basic deduction + the employment income deduction (minimum amount). Because the FY2025 (Reiwa 7) tax reform raised both of these, the level of the wall rose by ¥200,000.

Through 2024 (Reiwa 6)
¥1.03M
Employment income deduction (minimum)¥550,000
Basic deduction¥480,000
Total (wall)¥1.03M
From the 2025 (Reiwa 7) tax year
¥1.23M
Employment income deduction (minimum)¥650,000 (+¥100,000)
Basic deduction¥580,000 (+¥100,000)
Total (wall)¥1.23M (+¥200,000)

Checking the mechanism with a formula

Formula for the dependent wall
Income wall = employment income deduction (minimum) + basic deduction

[Old] ¥550,000 + ¥480,000 = ¥1.03 million

[New] ¥650,000 + ¥580,000 = ¥1.23 million (from the 2025 tax year)[National Tax Agency: 2025 (Reiwa 7) reform]

* If employment income is exactly the "wall" amount, the "total income" after subtracting the employment income deduction matches the basic deduction amount exactly, and taxable income becomes zero.

When does it take effect?

When this reform is reflected

The new rules apply from income earned January–December 2025 (Reiwa 7). Specifically:
・In the year-end adjustment of November–December 2025, declare spouses and dependents using the new threshold (¥1.23 million)
・In the February–March 2026 tax return (for 2025) as well, likewise use the new rules

Sorting out the types of "walls"

Even though people lump them together as "the income wall," the tax walls (income tax and residence tax) and the social insurance walls (health insurance and pension) are entirely separate rules. This reform changed only the tax walls.

⬆️ Changed
The income-tax/residence-tax dependent wall (spousal deduction and dependent deduction)
¥1.03M → ¥1.23M (FY2025 reform)
If the annual salary of a spouse, or of a dependent relative aged 16 or older (child or parent), is at or below this amount, the head of household can claim the spousal deduction or dependent deduction. Raised in line with the reform of the basic deduction and the employment income deduction.
⬆️ Changed
The upper limit of the special spousal deduction (the line where the full ¥380,000 is available)
Full amount up to a spouse's income of ¥1.5M → full amount up to ¥1.6M
Even if the spouse's income exceeds ¥1.23 million, ¥380,000 is available as the special spousal deduction. Previously the full amount (¥380,000) applied up to a spouse's income of ¥1.5 million, but the reform expanded the full amount up to ¥1.6 million. Above this it decreases in stages, and it phases out at about ¥2.01 million (varies with the head of household's income)[National Tax Agency No.1195].
→ Unchanged
Social insurance wall ① (enrollment in employees' pension and health insurance for part-timers at large companies)
¥1.06M (no change)
At a company with 101 or more employees, a part-timer who works 20 or more hours a week with monthly wages of ¥88,000 or more becomes obligated to enroll in employees' pension and health insurance. This is a separate rule, unrelated to taxes.
→ Unchanged
Social insurance wall ② (the line for being certified as a dependent)
¥1.3M (no change)
Once your annual income reaches ¥1.3 million or more, you lose your status as a "dependent" under your spouse's social insurance (health insurance and pension) and must enroll yourself in National Health Insurance and the National Pension. This is unchanged by the current tax reform.
→ Unchanged
The residence-tax exemption line (exemption from the per-capita levy)
Annual income of about ¥930,000–¥1 million (varies by municipality; no change)
The income line at which the municipal per-capita levy becomes exempt. Although this reform raised the basic deduction, this exemption line is set separately by each municipality's ordinance and is not directly linked to it.
Common misconception: "the ¥1.3 million wall is gone too" is wrong

What changed this time is only the income-tax/residence-tax dependent threshold (¥1.03 million → ¥1.23 million). The "¥1.3 million wall" for health insurance and pension remains as before. If your annual income exceeds ¥1.3 million, you leave social-insurance dependent status and separate premiums arise[Prime Minister's Office].

Simulation by income level

We compare how the available deduction changes under the old rules (through 2024) and the new rules (from 2025), by a spouse's annual salary. For cases where the head of household's total income is ¥9 million or less.

Change in deduction by spouse's income

Spouse's annual salary Old rules (through 2024) New rules (from 2025) Change
¥1 million or lessSpousal deduction ¥380,000Spousal deduction ¥380,000No change
¥1.1 millionSpecial spousal deduction ¥380,000Spousal deduction ¥380,000 ✓Classification improved
¥1.2 millionSpecial spousal deduction ¥380,000Spousal deduction ¥380,000 ✓Classification improved
¥1.25 millionSpecial spousal deduction ¥360,000Spousal deduction ¥380,000 ✓+¥20,000 improvement
¥1.3 millionSpecial spousal deduction ¥310,000Special spousal deduction ¥380,000 ✓+¥70,000 improvement
¥1.5 millionSpecial spousal deduction ¥380,000Special spousal deduction ¥380,000No change
¥1.6 millionSpecial spousal deduction ¥260,000Special spousal deduction ¥380,000 ✓+¥120,000 improvement
¥1.7 millionSpecial spousal deduction ¥210,000Special spousal deduction ¥380,000 ✓+¥170,000 improvement
¥1.8 millionSpecial spousal deduction ¥160,000Special spousal deduction ¥260,000+¥100,000 improvement
¥2 millionSpecial spousal deduction ¥60,000Special spousal deduction ¥110,000+¥50,000 improvement
Over ¥2.1 millionNot eligible (¥0)Not eligible (¥0)No change
How the special spousal deduction changes (after the 2025 reform, by spouse's income)
¥380k≤¥1.5M¥260k¥1.8M¥110k¥2M¥0>¥2.1M
Source: this article (where the total income of the person claiming the deduction is ¥9 million or less. National Tax Agency No.1195)

* The deduction category is determined by total income, i.e. annual salary minus the employment income deduction (old ¥550,000 → new ¥650,000). Bold rows are cases where the deduction increased from old to new.

Impact on part-time jobs of children and university students

Deductions the parent can claim under the new rules (from 2025)
  • If the child's income is ¥1.23 million or less, they qualify for the dependent deduction (¥380,000 for ages 16–18 and 23+; a specified dependent deduction of ¥630,000 for ages 19–22)
  • [Newly created] Special deduction for specified relatives: for a child aged 19–22, even if income exceeds ¥1.23 million, ¥630,000 applies up to ¥1.5 million, and the deduction continues in stages from over ¥1.5 million to ¥1.88 million
  • Even if a university student works a lot part-time, the parent's deduction (¥630,000) is maintained in full up to ¥1.5 million
Cases that need attention
  • For a child not aged 19–22, exceeding ¥1.23 million makes them ineligible for the dependent deduction (¥380,000)
  • The child themselves starts to owe income tax once their income exceeds ¥1.6 million (due to the basic-deduction special provision for 2025 and 2026)
  • Income other than salary (contract work, Mercari sales, etc.) requires a separate income calculation
  • The social insurance walls (¥1.06 million and ¥1.3 million) do not change with the tax reform
Example: a university-student child (age 21) with part-time income of ¥1.15 million
Child's part-time annual income¥1.15 million
Employment income deduction (new)− ¥650,000
Child's total income¥500,000 (¥580,000 or less → dependent OK)
Specified dependent deduction (ages 19–22)¥630,000
Head of household's tax saving (20% income tax + 10% residence tax)about ¥189,000
Under the old rules, ¥1.15 million meant "out of dependent status" and zero deduction. Under the new rules, this is a case that produces about ¥190,000 in tax savings.

Cautions and common misconceptions

① "All the walls changed" is incorrect

What changed is the income-tax/residence-tax dependent threshold (¥1.03 million → ¥1.23 million), the line where the special spousal deduction becomes full (¥1.5 million → ¥1.6 million), and the line where the person themselves starts paying income tax (¥1.03 million → ¥1.6 million). The social-insurance walls of ¥1.06 million and ¥1.3 million stay the same. If your annual income exceeds ¥1.3 million, you lose social-insurance dependent status and must pay premiums yourself.

② The "¥1.23 million wall" and the "¥1.6 million wall" are different things

The news reported that "the ¥1.03 million wall becomes ¥1.6 million," but in fact you won't get confused if you distinguish two different lines.

¥1.23M
The line for "staying eligible" for the dependent deduction and spousal deduction
If the dependent person's annual salary is ¥1.23 million or less (total income ¥580,000 or less), the head of household can claim the full spousal deduction or dependent deduction (¥380,000, or ¥630,000 for a specified dependent). Above that, a spouse is covered by the special spousal deduction, and those of university-student age are covered by the special deduction for specified relatives.
¥1.6M
The line where the person themselves "starts paying income tax"
Employment income deduction ¥650,000 + basic deduction (¥950,000 under a special provision for people with total income of ¥1.32 million or less) = ¥1.6 million. For 2025 and 2026, thanks to the added basic-deduction special provision, there are now many cases where the person owes no income tax up to an annual salary of ¥1.6 million.

③ "Income other than salary" needs a separate calculation

If you have income from flea-market apps, contract work (miscellaneous income or business income), stock dividends, or real estate, you cannot judge by "annual salary" alone. Calculate total income separately for each and check whether it is ¥580,000 or less.

④ The taxes of the spouse and of the person themselves are separate issues

The "wall" is about the deduction that the head of household (the supporting side) can claim. The income tax of the spouse or the student themselves is calculated separately from that person's own income and deductions. As a result of the reform raising the basic deduction, if there is only salary income, there are now many cases where the person owes no income tax up to an annual income of around ¥1.6 million (for 2025 and 2026, due to the added basic-deduction special provision for low earners).

⑤ The residence-tax exemption line (about ¥1 million) does not change

The rough income line at which the residence-tax per-capita levy becomes exempt (about ¥930,000–¥1 million in many municipalities) is not directly targeted by this reform. Where this line is used for things such as the eligibility conditions of various benefit payments (the determination of residence-tax-exempt households), you still need to check it separately.

Handling the year-end adjustment and tax return

On the year-end adjustment's "Declaration of Spousal Deduction, etc." and "Declaration of Dependent Deduction, etc." submitted in November–December 2025, enter figures using the new threshold (total income of ¥580,000 or less = annual income of ¥1.23 million or less). There are cases where a family member you could not claim as a dependent until last year becomes eligible this year. Recheck the projected annual income of dependents whose income has risen.

FAQ

In the end, what did the "¥1.03 million wall" become?

It splits into two. You can remain eligible for the dependent deduction and spousal deduction up to an income of ¥1.23 million. Income tax starts to apply to the person themselves from an income of ¥1.6 million (for 2025 and 2026, due to the added basic-deduction special provision for low earners).

Does a university-student child leave dependent status once they exceed ¥1.23 million?

For ages 19–22, thanks to the newly created "special deduction for specified relatives," even if the child's income exceeds ¥1.23 million, the parent can claim the full ¥630,000 deduction up to ¥1.5 million, and it continues in stages from ¥1.5 million to ¥1.88 million.

Did the ¥1.3 million wall also rise?

No. The social-insurance (health insurance and pension) walls of ¥1.06 million and ¥1.3 million have not changed with this tax reform. Above ¥1.3 million you leave dependent status and bear premiums yourself.

From which year's income do the new rules apply?

They apply from income earned January–December 2025 (Reiwa 7). They are reflected in the year-end adjustment at the end of 2025 and in the 2026 tax return (for 2025).