Income tax deduction for dependents not residing in Japan

[Deep Blue]

Correction
If you are a top rate tax payer, the government will pay 35.945% x Y380,000 + 10% x Y330,000 = Y207,591 out of the Y380,000 in National, Reconstruction and Residents' Tax savings...

And I can multiply this by three, one for each “dependent”?

Seems like a very easy way to reduce some of the taxes we have to pay. Did anyone do this, any pitfalls or pratfalls?

One thing I can think of is my parents have a joint account, if I made two 380k transfers from my account here to their joint account I can see some Japanese tax official struggling with the
idea of a joint account and trying to say I’m only supporting one parent or something.

Should be fine, so long as you can produce all the required supporting documents.

Seems fairly risk-free to try. I assume family relationship document would be my birth certificate and my sisters birth certificate, probably has to be translated into Japanese. Then proof of transfer (for her, seems I don’t need to prove for parents as they are over 70) is just a PDF or printed copy of the online bank transfer I would make. Doesn’t seem too onerous at all.

[Tkydon]

you will save that amount of tax, and so that is the same as the government paying that amount...

Sorry to get pedantic but it's not the same. Net 0 is nobody paying anything, which is not equivalent to the government paying.

If you don't give me ¥1M yen, that's not equivalent to me paying you ¥1M yen.

Anyway... back to the dependents deduction

Not Net 0... Net - Y207,591 - amount saved on the Income related part of the Health Insurance Premiums...

e.g. Saitama
- Basic Pax 45,000 - 7.17% - Max 650,000
- Latter Term Pax 16,100 - 2.42% - Max 220,000
- Long Term Pax 15,200 - 2.24% - Max 170,000

Something up to either 9.69% or 9.41% of household income

Depending on Tax Band.... Tax rates of 5.105%, 10.21%, 20.42%, 23.483%, 33.693%, 40.84%, or 45.945% apply... if the contributions fall within a single band...


Thinking about it, the Income related part of the Health Insurance Premiums probably makes up for the difference in Dependent Allowance between the National and Residents' Tax deductions... I'll calculate later...

[adamu]

If you don't send that Y380,000 to your dependent, the govt will only let you keep (in this case) Y380,000 - Y207,591 = Y172,409 of it and take the rest...

Right, but that's assuming the government already has the money, which they don't. By donating, taxable income is lowered, so less tax is due. The government don't pay any money, they just don't get as much. If not getting money is equivalent to paying, then by the same logic not giving money to the dependent is equivalent to the dependent paying your income and tax.

Assuming the ¥207,591 figure is correct:

No money to dependent:
Dependent misses out: -¥380,000
Income after tax: ¥172,409
Government: ¥207,509
Total: ¥0

Money to dependent and deduction applied:
Dependent gets money: ¥380,000
Tax saved, but gave money to dependent: -¥172491
Government misses out on tax: -¥207509
Total: ¥0

I think. I'm starting to confuse myself now

[Tkydon]

Money to dependent and deduction applied:
Dependent gets money: ¥380,000
Tax saved, but gave money to dependent: -¥172491
Government misses out on tax: -¥207509
Total: ¥0

Dependent gets money: ¥380,000
Deep Blue only Paid: -¥172491
Government paid missed tax or tax refund: -¥207509


Same as iDECO, but you can't declare iDECO at the beginning of the year, so only at the end of the year to get a refund...

Say at the Y23,000 per month level
Total 276,000
At the end of the year, Tax Refund of Marginal Rate Income Tax and Reconstruction Tax already withheld on the gross income of Y276,000
You can sweep the Refund directly into NISA...

So now you have a invested total of 276,000 + Tax Refund... with reduced Residents' Taxes and Health Insurance costs in the following year...
or rather
iDECO contains (276,000 - Tax Refund) from you + Tax Refund from govt) = Y276,000 and
NISA contains 276,000 - (276,000 - Tax Refund) from you

You paid a total of Y276,000 and the govt paid (lost out on) the Tax Refund + reduced Residents' Taxes and Income relate portion of Health Insurance costs...