How the tax credit works
The difference from income deductions, and why the tax-saving effect is so large.
BasicsLoan limits by housing type
A list of borrowing limits for certified housing, energy-efficient housing, and existing homes.
ImportantTax-saving simulation
Annual credit and 13-year cumulative total by loan balance.
ComparisonFirst year: how to file a tax return
The documents and filing flow required in Feb–Mar of the year after you move in.
ProcedureSecond year onward: year-end adjustment
For employees it is completed via year-end adjustment. How to use the certificate.
Year-end adjustmentHow the "tax credit" works
The mortgage (home loan) tax credit is a tax credit. Unlike an "income deduction" such as iDeCo or the life-insurance premium deduction, it is subtracted directly from the calculated tax amount itself, so its tax-saving effect is certain and large.
The effect is smaller when the tax rate is low
The same amount is reduced regardless of the tax rate
Credit period: 13 years for newly built and buy-and-resell homes; 10 years for existing homes (used homes)
Any amount that cannot be fully used against income tax is also deducted from residence tax (up to ¥136,500/year)
Income requirement: total income of ¥20 million or less[National Tax Agency No.1213]
The former 1% credit rate came to fall below loan interest rates in an era of ultra-low interest, and the "reverse-margin" situation where "the more you borrow, the more you gain" was seen as a problem. In the 2022 reform, it was lowered to 0.7%, while the credit period was extended from 10 to 13 years (for newly built homes).
Borrowing limits by housing type
The credit ceiling differs by the type of housing, its energy-saving performance, and the timing of moving in. The main categories for moving in during Reiwa 6–7 (2024–2025) are as follows.
Newly built homes / buy-and-resell (credit period 13 years)
Certified low-carbon housing
energy-efficient housing
compliant housing
(general housing)
Existing homes (used homes) (credit period 10 years)
| Type of housing | Borrowing limit | Maximum cumulative credit (10 years) |
|---|---|---|
| Certified long-life quality / certified low-carbon housing | ¥30 million | about ¥2.1 million |
| ZEH-level / energy-saving-standard compliant housing | ¥20 million | about ¥1.4 million |
| Other housing (general housing) | ¥20 million | about ¥1.4 million |
* The maximum cumulative credit is the ceiling of "borrowing limit × 0.7% × number of credit years." If the actual balance is below the limit, balance × 0.7% applies.
For newly built "other housing" (housing that does not meet energy-saving standards) moved into on or after January of Reiwa 6 (2024), the borrowing limit is ¥0, and the mortgage tax credit cannot be received. When you buy or build a new home, always check whether an energy-saving-standard compliance certificate is available[Ministry of Land, Infrastructure, Transport and Tourism].
Tax-saving simulation
0.7% of the loan balance is subtracted from your tax each year. Because the balance decreases every year, the credit is largest in the first year.
Guide to the annual credit by year-end balance
| Year-end loan balance | Annual credit (×0.7%) | 13-year cumulative total (guide) | Example of eligible housing |
|---|---|---|---|
| ¥20 million | ¥140,000 | about ¥1.68 million | Energy-saving-standard compliant / existing home |
| ¥30 million | ¥210,000 | about ¥2.52 million | Energy-saving-standard compliant housing |
| ¥35 million | ¥245,000 | about ¥2.94 million | ZEH-level energy-efficient housing |
| ¥40 million | ¥280,000 | about ¥3.36 million | Certified housing (within the ¥45 million limit) |
| ¥45 million (limit) | ¥315,000 | about ¥3.78 million | Certified long-life quality / certified low-carbon housing |
* Because the balance decreases with repayment each year, the actual cumulative total is less than above. The figures above are guides from a simplified calculation.
If your income tax is small, part is also deducted from residence tax
If the annual credit exceeds your income tax, the amount that cannot be fully used is additionally deducted from the income-levy portion of residence tax, up to ¥136,500/year. Even those with low income and little income tax can make use of the credit including the residence-tax portion.
First year: how to file a tax return
Only in the first year after acquiring a home, a tax return is required even for employees. File at the tax office or via e-Tax during February 16 to March 15 of the year after you move in.
・Year-end loan balance certificate for the mortgage (from the financial institution)
・Certificate of registered matters (obtained at the Legal Affairs Bureau)
・Copy of your certificate of residence (municipal counter)
・Copy of the sales contract or the construction work contract
・Documents confirming the home's floor area (such as the important-matters explanation document)
・Energy-saving-standard compliance certificate or certification notice (only for applicable housing)
Second year onward: how to do the year-end adjustment (employees)
From the second year, you can claim the mortgage tax credit through your company's year-end adjustment. The procedure is completed simply by submitting two documents to your company each year.
Annual procedure (from the second year)
| Document | Where to get it | Timing |
|---|---|---|
| Mortgage tax credit certificate | The one issued all at once by the tax office after the first year's tax return (use one sheet each year) | The one you keep on hand |
| Year-end loan balance certificate for the mortgage | Mailed from the financial institution where you took out the loan (bank, Japan Housing Finance Agency, etc.) | Arrives around October–November |
Just transcribe the "mortgage balance" stated on the certificate. The company (or the tax office) calculates the credit.
* If you have borrowed from multiple financial institutions, add up all the balance certificates and enter the total.
If you lose the credit certificate issued all at once by the tax office, you can apply for reissue at your nearest tax office. Submit the "Application for Issuance of the Certificate for the Special Credit for Housing Loans, etc." Since it takes time, complete the procedure early, before the year-end adjustment deadline.
Self-employed and employees who must file a tax return need to file every year
Sole proprietors and freelancers claim the mortgage tax credit by filing a tax return every year, even from the second year onward. Employees with side-job income, or employees who file a tax return for Furusato Nozei, can also claim it together on their tax return rather than through the year-end adjustment (which lets them handle everything in one procedure).
Points to note
FAQ
What are the credit rate and period?
The credit is the year-end loan balance (up to the borrowing limit) × 0.7%, and the credit period is 13 years for newly built homes, etc., and 10 years for used homes. Any amount that cannot be fully used against income tax is partly deducted from residence tax too (a total income of ¥20 million or less is required).
Are there preferences for child-rearing households?
"Child-rearing households / young-couple households" — those with a dependent under 19, or where either spouse is under 40 — get an added amount to the borrowing limit for newly built homes. The details change by fiscal year, so check the latest information with the Ministry of Land, Infrastructure, Transport and Tourism.
Is the procedure different for the first year versus the second year onward?
A tax return is required in the first year. From the second year onward, employees can complete it via year-end adjustment by submitting to their employer the "certificate for the special credit for housing loans, etc. for year-end adjustment" and the "year-end balance certificate."
Can it be combined with Furusato Nozei?
They can be combined, but if the mortgage tax credit lowers the income-levy portion of your residence tax, the Furusato Nozei ceiling may also drop. Since the first year requires a tax return, the one-stop special exception cannot be used.
Sources and official information
This article is based on the following official information. Systems may be revised. Please check the latest information on each official site.
- National Tax Agency, Tax Answer No.1213 When you newly build or acquire a newly built home (Special Credit for Housing Loans, etc.) (in Japanese)
- Ministry of Land, Infrastructure, Transport and Tourism, About the mortgage tax reduction system (in Japanese)
- National Tax Agency, Tax Return Preparation Corner (in Japanese)
- Ministry of Finance, Overview of the Act on Special Measures Concerning Taxation (in Japanese)
* The content of this article is for informational purposes and is not tax or legal advice. Borrowing limits, the added amount for child-rearing households, and the like change by fiscal year. For individual judgments, please consult a tax office or a tax accountant.