If you only remember "the medical expense deduction becomes available once you spend more than ¥100,000 a year," you are probably losing money every year. In reality, if your income is low you can use it even below ¥100,000, you can combine your family's expenses, and if you subtract insurance payouts the wrong way the deduction amount changes. Get the key points right and the amount refunded can differ greatly. This article organizes everything so you won't get lost at tax-return time: the formula and concrete examples, the correct way to subtract insurance payouts, the line between what qualifies and what doesn't, and a gain-loss comparison with the Self-Medication Tax System.
What the medical expense deduction is (just three things first)
The medical expense deduction is an income deduction that lets you subtract from your income the amount by which medical expenses paid during a year (January 1 – December 31) exceed a certain threshold. It is not a "tax credit" that directly subtracts from the tax itself; by making your taxable income smaller, it lightens your income tax and the next fiscal year's residence tax. The first three points to grasp are as follows.
① Medical expenses of family members who share the same household budget can be combined (allowed even if not living together, as long as the household budget is shared through remittances, etc.).
② Employees also need to file a tax return themselves. It cannot be received through the year-end adjustment.
③ Even if you forget to file, you can go back 5 years (refund claim). You can recover past years too.
The formula and the "threshold amount"
The threshold amount is ¥100,000. However, for people whose total income for the year is under ¥2 million, it is "total income × 5%" (which is smaller than ¥100,000). The maximum deduction is ¥2 million[National Tax Agency No.1120].
The key point is that the lower your income, the lower the threshold falls. For example, if your total income from part-time earnings, etc. is ¥1.5 million, the threshold is ¥1.5 million × 5% = ¥75,000. Even with ¥80,000 of medical expenses you can take the deduction. Before giving up because "I didn't reach ¥100,000," check your own threshold amount.
Concrete examples: "how much comes back?"
A rough guide to the tax refunded (lightened) is deduction × (income tax rate + residence tax rate 10%). The income tax rate is higher for people with higher incomes, and the effect of the medical expense deduction grows accordingly.
Tax reduction ≒ ¥80,000 × (20% + 10%) = about ¥24,000 (income tax refund about ¥16,000 + next year's residence tax reduced about ¥8,000)
Deduction = ¥90,000 − ¥75,000 = ¥15,000 (zero under the ¥100,000 standard, but there is a deduction under the 5% standard)
| Annual medical expenses | Compensation | Deduction (threshold ¥100,000) | Guide to tax reduction (rate 20% + residence tax 10%) |
|---|---|---|---|
| ¥150,000 | None | ¥50,000 | about ¥15,000 |
| ¥350,000 | ¥50,000 | ¥200,000 | about ¥60,000 |
| ¥600,000 | ¥100,000 | ¥400,000 | about ¥120,000 |
* The tax reduction varies by income tax rate. For someone at a 5% rate, the same deduction shrinks the reduction to (5% + 10%).
The easy-to-trip-up "way to subtract the compensation amount"
If you received an insurance payout or benefit, you subtract it from your medical expenses; but if you subtract it the wrong way, you either lose out or, conversely, make a filing error. The National Tax Agency's rules are clear.
Rule 1: subtract the compensation only up to "the medical expenses that were the object of that benefit"
What you subtract is strictly limited to the range of medical expenses that caused that insurance payout, etc. to be paid. Even if there is a leftover amount you couldn't fully subtract, you do not subtract it from other medical expenses[National Tax Agency Q&A cases].
Eligible medical expenses = ¥250,000 − ¥200,000 = ¥50,000 → ¥50,000 − ¥100,000 = deduction ¥0 (no deduction in this case)
Rule 2: don't mix up what to subtract and what not to subtract
Subtract from medical expenses (compensation amount)
- Hospitalization and surgery benefits from life or medical insurance
- High-cost medical expense benefit / treatment benefit (reimbursement from health insurance)
- Childbirth lump-sum grant
- Damages intended to compensate medical expenses
Do not subtract (not compensation)
- Injury and sickness allowance (income compensation for leave)
- Maternity allowance (income compensation for leave)
- Condolence money
- Benefits whose purpose is not to compensate medical expenses
The childbirth lump-sum grant is subtracted, but the maternity allowance is not subtracted. The allowance is "income compensation for the period you cannot work," not compensation for medical expenses. If you confuse the two and subtract both, you will understate your deduction amount.
What qualifies and what doesn't (including gray zones)[National Tax Agency No.1122]
Tends to qualify
- Costs of consultation, treatment, hospitalization, and surgery
- Prescription drugs and over-the-counter drugs for treatment
- Dental treatment (insured treatment, and treatment-purpose free-choice treatment / implants)
- Transport costs for commuting to treatment (public transport)
- Childbirth and delivery costs, prenatal checkups
- LASIK / ICL for restoring eyesight
- Out-of-pocket costs for certain facility and in-home services under long-term care insurance
- Costs of infertility treatment / artificial insemination
Tends not to qualify
- Health checkups / comprehensive medical exams (* qualify if an abnormality is found and it moves to treatment)
- Vaccinations, and supplements / vitamins for health promotion
- Cosmetic surgery / teeth whitening for beauty purposes
- Costs of ordinary glasses / contact lenses for nearsightedness, etc.
- Charges for a private-room bed for the convenience of the patient or family
- Gasoline and parking costs for a private car
- Taxi fares in principle (qualify in emergencies where public transport cannot be used, etc.)
Transport costs for commuting to treatment are judged by whether they are "directly necessary for treatment." Trains and buses qualify; gasoline and parking for a private car do not. Taxis do not qualify in principle, but are allowed in urgent cases or when public transport cannot be used. The transport costs of a person accompanying a young child or someone with difficulty walking to their treatment can also qualify. For public-transport fares with no receipt, keep a memo of the date, route, and amount.
Self-Medication Tax System: "which is better?"
In a year when you buy a lot of over-the-counter drugs, you may be able to choose the Self-Medication Tax System instead of the ordinary medical expense deduction. The two cannot be used together; you choose one or the other[National Tax Agency No.1129].
| Item | Ordinary medical expense deduction | Self-Medication Tax System |
|---|---|---|
| Eligible spending | Medical expenses for treatment in general | Purchase cost of eligible over-the-counter drugs (switch OTC drugs, etc.) |
| Threshold (lower limit) | ¥100,000 / income × 5% if total income is under ¥2 million | ¥12,000 |
| Maximum deduction | ¥2 million | ¥88,000 (up to the equivalent of ¥100,000 in purchases) |
| Conditions | None in particular | You must be doing "certain efforts for health" such as a health checkup or vaccination |
| Application deadline | Permanent | For purchases through December 31, Reiwa 8 (2026) |
If your annual medical expenses exceed the threshold (¥100,000 or income × 5%), the ordinary medical expense deduction is often more advantageous. Conversely, if your medical expenses are small but you buy more than ¥12,000 a year of eligible over-the-counter drugs, you may be able to take a deduction under the Self-Medication Tax System. Estimate both deduction amounts and choose the larger (you can calculate both on the tax-return preparation corner).
Filing procedure and required documents
- Total up a year's medical expenses. Using the National Tax Agency's "medical expense tally form" or the "notice of medical expenses (medical expense notification)" that arrives from your health insurer makes creating the statement easier.
- Create the "medical expense deduction statement." From the 2017 tax year, submitting receipts became unnecessary and changed to attaching the statement (attaching a medical expense notification lets you simplify the itemized entries).
- Prepare and submit the tax return. The National Tax Agency's "tax-return preparation corner" and e-Tax are convenient. Enter the compensation amount and the deduction is calculated automatically.
- Keep the receipts for 5 years. Submission is unnecessary, but store them so you can present them if the tax office asks.
Even if you forgot to file for the medical expense deduction, you can make a refund claim for 5 years from January 1 of the year after that year. If there was a past year with high medical expenses, you can go back and recover it.
FAQ
Who in the family should file the medical expenses together?
Combine the amounts of family members who share the same household budget, and in principle the reduction is larger if the person with the higher income tax rate files. For a dual-income household, the basic approach is to combine them under the higher earner.
Can it be used only if you exceed ¥100,000?
No. For people whose total income is under ¥2 million, the threshold becomes "income × 5%," so you can deduct even below ¥100,000 in some cases.
Do you always subtract high-cost medical expense benefits and insurance payouts in full?
You subtract them up to the limit of the medical expenses that were the object of that benefit. You do not need to subtract the portion you couldn't fully subtract from other medical expenses. The injury and sickness allowance and the maternity allowance are not compensation, so they are not subtracted.
What about a year when you only bought over-the-counter drugs?
If you are doing efforts such as a health checkup or vaccination, you may be able to choose the Self-Medication Tax System for the portion of eligible over-the-counter drug purchases exceeding ¥12,000 a year (applied by choice, as an alternative to the ordinary medical expense deduction).
What about past years I forgot to file?
As a refund claim, you can file retroactively as long as it is within 5 years from the year after that year.
Summary
Reference links (sources)
This article is based on the following materials published by the National Tax Agency (neutral, primary sources). Because the system may be revised, please check the latest content before filing.
- National Tax Agency No.1120 When you have paid medical expenses (medical expense deduction) (in Japanese)
- National Tax Agency No.1122 Medical expenses eligible for the medical expense deduction (in Japanese)
- National Tax Agency No.1124 Out-of-pocket amounts for services under the long-term care insurance system eligible for the medical expense deduction (in Japanese)
- National Tax Agency Q&A cases: compensation exceeding the medical expenses paid (in Japanese)
- National Tax Agency No.1128 Purchase cost of specified over-the-counter drugs, etc. eligible for the Self-Medication Tax System (in Japanese)
- National Tax Agency No.1129 Self-Medication Tax System (special provision of the medical expense deduction) (in Japanese)
- National Tax Agency tax-return feature: for those receiving the medical expense deduction (in Japanese)
* This article is general information, not tax advice. For individual judgments, please confirm with a tax office or a tax accountant.