Tax situation after retirement
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ArabikiDavid
- Newbie
- Posts: 6
- Joined: Tue Jul 30, 2019 7:16 am
Tax situation after retirement
Hi, all. I'm trying to get a picture of my financial situation post retirement. Do retired persons have a lower tax rate for income tax (所得税)? Ditto for resident's tax (住民税)? I know you have to pay for 介護保険 and 国民健康保険. Are there any other expenses I may not be aware of as I'm still working? Thanks for any help and advice you may have!
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captainspoke
- Sensei
- Posts: 1572
- Joined: Tue Aug 15, 2017 9:44 am
Re: Tax situation after retirement
Of course, watch out for your first year after retirement, since residence tax is paid in arrears. This still surprises some people. (and healthcare is based on that)
It depends on your income, from pension(s) along with any other sources (investments).
Have you cashed out on some fund holdings? (in a taxable account) --expect some taxes. Are you getting paid dividends (again in a taxable account)? --expect some taxes. ((also increased healthcare premiums))
Apart from those things, do you have other income (e/g/, some part time work)? The tax rates do increase as those earnings increase, just like during your working years.
It depends on your income, from pension(s) along with any other sources (investments).
Have you cashed out on some fund holdings? (in a taxable account) --expect some taxes. Are you getting paid dividends (again in a taxable account)? --expect some taxes. ((also increased healthcare premiums))
Apart from those things, do you have other income (e/g/, some part time work)? The tax rates do increase as those earnings increase, just like during your working years.
Re: Tax situation after retirement
As Captainspoke said,
You are currently paying Residents' Taxes on 2022 Income, payable between July 2023 and June 2024.
You will have to pay Residents' Taxes on 2023 Income, payable between July 2024 and June 2025,
and You will have to pay Residents' Taxes on 2024 Income, payable between July 2025 and June 2026. This may be the first year in which your taxes will be assessed on your retirement income.
Whilst you are still in employment, your Residents' Taxes are probably being withheld monthly in 12 installments. After you leave employment they will send you Payment Slips. You can either pay in a Single Annual payment in July, or in 4 quarterly installments of 3 months' payments each in July, October, January and April. You need to plan your cashflow accordingly.
The Residents' Tax Rate does not go down. It stays at 10% or Taxable Income, but your taxable income will go down.
If you own a property, you will still have to pay the quarterly Fixed Asset Tax - Kotei-Shisan-Zei, payable in June, September, December, and March.
In the same way, you are currently paying Health Insurance for your household based on 2022 Household Income, payable between June 2023 and March 2024.
You will have to pay Health Insurance based on 2023 Household Income, payable between June 2024 and March 2025,
and You will have to pay Health Insurance based on 2024 Household Income, payable between June 2025 and March 2026. This may be the first year in which your Health Insurance will be assessed on your retirement income.
If you were in a Private Health Insurance System, you may be able to continue with that provider for up to two years. You will probably find that that provider is slightly cheaper than Kokumin Kenkou Hoken for the first year after retirement (the private provider spreads the premium over 12 months, whilst Kokumin Kenkou Hoken spreads the payments over 10 months with premium free months in Apri and May), but it will still be in line with the amount you were paying whilst still in employment. You will probably find that Kokumin Kenkou Hoken will be cheaper for the second year after retirement, as it is assessed on the partial year of retirement income, where the private health insurance will continue at the same premium for the second year.
The same marginal tax rates apply to your income in retirement, but as the total taxable income goes down so does the marginal rate and total national income tax due.
If you are receiving (a) Pension(s), then there are additional deductions that reduce the total taxable income, the marginal rate and total national income tax due. See Page 8 of This Doc (Page 12 of the PDF) for details of the Pension Deduction. Calculating the Public Pension Plan Deduction (Calculation Table)
https://www.tax.metro.tokyo.lg.jp/book/ ... k2022e.pdf
The Marginal National Income Tax Rates are shown on Page 65 (Page 69 of the PDF) for Aggregate Taxable Income after All Deductions and Allowances.
For Pensions, the tax and health insurance may be withheld at source, but if it is not, you would need to put the money aside to pay bills as they come due.
On National Pension, If you have been in Japan and paying in to the National Basic Pension - Kokumin Kihon Nenkin, for less than the full 480 months, and if you are younger than 65, then you may continue to pay voluntary Basic Pension Contributions to increase your total number of qualifying months. The Voluntary Contribution is currently Y16,520 per month.
You can decide to take the National Pension anytime from Age 60 to Age 75. See the Basic Pension Calculation here:
https://www.nenkin.go.jp/international/ ... nsion.html
and Employee Pension Calculation here (if applicable):
https://www.nenkin.go.jp/international/ ... loyee.html
If you decide to start taking the National Pension before Age 65, the amount will be reduced by a Discount Factor, based on the number of months before 65 and the total number of qualifying months at the time, as shown here:
https://www.nenkin.go.jp/service/jukyu/ ... html#cms01
So, at 60 the Payout would be 100 - 24% = 76%
If you decide to start taking after Age 65, the amount will be increased by a Factor, based on the number of months after Age 65 and the total number of qualifying months at age 65, as shown here:
https://www.nenkin.go.jp/service/jukyu/ ... 21-02.html
So At 70 the Payout would be 100 + 42% = 142%
At 75 the Payout would be 100 + 84% = 184%
It would probably be a good idea to keep close track of all outgoings including deductions from payroll, for several months before you retire to ensure you budget for everything that you will need to pay after the income stops. This probably will NOT be very different from the months before retirement due to the reasons cited above.
Anything I have forgotten? If anyone thinks of anything, or if I think of anything, I will edit this with additions.
You are currently paying Residents' Taxes on 2022 Income, payable between July 2023 and June 2024.
You will have to pay Residents' Taxes on 2023 Income, payable between July 2024 and June 2025,
and You will have to pay Residents' Taxes on 2024 Income, payable between July 2025 and June 2026. This may be the first year in which your taxes will be assessed on your retirement income.
Whilst you are still in employment, your Residents' Taxes are probably being withheld monthly in 12 installments. After you leave employment they will send you Payment Slips. You can either pay in a Single Annual payment in July, or in 4 quarterly installments of 3 months' payments each in July, October, January and April. You need to plan your cashflow accordingly.
The Residents' Tax Rate does not go down. It stays at 10% or Taxable Income, but your taxable income will go down.
If you own a property, you will still have to pay the quarterly Fixed Asset Tax - Kotei-Shisan-Zei, payable in June, September, December, and March.
In the same way, you are currently paying Health Insurance for your household based on 2022 Household Income, payable between June 2023 and March 2024.
You will have to pay Health Insurance based on 2023 Household Income, payable between June 2024 and March 2025,
and You will have to pay Health Insurance based on 2024 Household Income, payable between June 2025 and March 2026. This may be the first year in which your Health Insurance will be assessed on your retirement income.
If you were in a Private Health Insurance System, you may be able to continue with that provider for up to two years. You will probably find that that provider is slightly cheaper than Kokumin Kenkou Hoken for the first year after retirement (the private provider spreads the premium over 12 months, whilst Kokumin Kenkou Hoken spreads the payments over 10 months with premium free months in Apri and May), but it will still be in line with the amount you were paying whilst still in employment. You will probably find that Kokumin Kenkou Hoken will be cheaper for the second year after retirement, as it is assessed on the partial year of retirement income, where the private health insurance will continue at the same premium for the second year.
The same marginal tax rates apply to your income in retirement, but as the total taxable income goes down so does the marginal rate and total national income tax due.
If you are receiving (a) Pension(s), then there are additional deductions that reduce the total taxable income, the marginal rate and total national income tax due. See Page 8 of This Doc (Page 12 of the PDF) for details of the Pension Deduction. Calculating the Public Pension Plan Deduction (Calculation Table)
https://www.tax.metro.tokyo.lg.jp/book/ ... k2022e.pdf
The Marginal National Income Tax Rates are shown on Page 65 (Page 69 of the PDF) for Aggregate Taxable Income after All Deductions and Allowances.
For Pensions, the tax and health insurance may be withheld at source, but if it is not, you would need to put the money aside to pay bills as they come due.
On National Pension, If you have been in Japan and paying in to the National Basic Pension - Kokumin Kihon Nenkin, for less than the full 480 months, and if you are younger than 65, then you may continue to pay voluntary Basic Pension Contributions to increase your total number of qualifying months. The Voluntary Contribution is currently Y16,520 per month.
You can decide to take the National Pension anytime from Age 60 to Age 75. See the Basic Pension Calculation here:
https://www.nenkin.go.jp/international/ ... nsion.html
and Employee Pension Calculation here (if applicable):
https://www.nenkin.go.jp/international/ ... loyee.html
If you decide to start taking the National Pension before Age 65, the amount will be reduced by a Discount Factor, based on the number of months before 65 and the total number of qualifying months at the time, as shown here:
https://www.nenkin.go.jp/service/jukyu/ ... html#cms01
So, at 60 the Payout would be 100 - 24% = 76%
If you decide to start taking after Age 65, the amount will be increased by a Factor, based on the number of months after Age 65 and the total number of qualifying months at age 65, as shown here:
https://www.nenkin.go.jp/service/jukyu/ ... 21-02.html
So At 70 the Payout would be 100 + 42% = 142%
At 75 the Payout would be 100 + 84% = 184%
It would probably be a good idea to keep close track of all outgoings including deductions from payroll, for several months before you retire to ensure you budget for everything that you will need to pay after the income stops. This probably will NOT be very different from the months before retirement due to the reasons cited above.
Anything I have forgotten? If anyone thinks of anything, or if I think of anything, I will edit this with additions.
:
:
This Guide to Japanese Taxes, English and Japanese Tai-Yaku 対訳, is now a little dated:
https://zaik.jp/books/472-4
The Publisher is not planning to publish an update for '23 Tax Season.
:
This Guide to Japanese Taxes, English and Japanese Tai-Yaku 対訳, is now a little dated:
https://zaik.jp/books/472-4
The Publisher is not planning to publish an update for '23 Tax Season.
Re: Tax situation after retirement
I am currently retired and paying for kokumin kenko hoken. I recently sold some real estate abroad, and I'm aware that I need to declare this income in Japan and pay 20% income tax and resident tax. However, I'm curious whether this sale will also affect the public health insurance premium I'll be required to pay in the following year. If it does, this would mean that I'll need to allocate a total of 32% of the capital gain towards taxes and health insurance (20% for taxes and 12% for health insurance). Does anyone know about this?
Similar question regarding the stocks I hold abroad. If I were to sell these stocks, would it have a similar impact on my public health insurance premium? Your knowledge or experiences would be greatly appreciated.
Similar question regarding the stocks I hold abroad. If I were to sell these stocks, would it have a similar impact on my public health insurance premium? Your knowledge or experiences would be greatly appreciated.
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captainspoke
- Sensei
- Posts: 1572
- Joined: Tue Aug 15, 2017 9:44 am
Re: Tax situation after retirement
For this part, capital gains (along with dividends and other distributions) certainly do impact your health premiums.
As for real estate, my answer/guess would again be yes, but there may be some quirks/ins&outs with real estate that I don't know about. (Also, I'm not sure about your percentages on the health insurance side.)
Re: Tax situation after retirement
Thank you.
By the way, does anyone know a reliable tax accountant in Tokyo?
In addition to the impact on public health insurance premiums, I also need to consult regarding tax filing for the real estate sale, declaration of foreign assets exceeding 50 million, and tax filing for inheritance. Language proficiency in English is not essential, though preferred. What's more important is that the accountant possesses a good understanding of cross-border tax issues.
By the way, does anyone know a reliable tax accountant in Tokyo?
In addition to the impact on public health insurance premiums, I also need to consult regarding tax filing for the real estate sale, declaration of foreign assets exceeding 50 million, and tax filing for inheritance. Language proficiency in English is not essential, though preferred. What's more important is that the accountant possesses a good understanding of cross-border tax issues.