JimNasium wrote: ↑Sun Nov 12, 2023 1:05 pm
I missed some years paying pension by (stupidly) ignoring paying it when I first arrived here, but I’m back on track now. My plan is to make contributions until I’m 65 to get as much as possible out of it. But, there is something I’ve noticed, and would be interested in hearing your guys thoughts. From what I can tell if you make less than 1,000,000 yen per year you become low income and don’t have to pay residence tax, and your medical payments become lower (and I assume there’s an advantage with income tax and other things too). Is there a point where it would be better to stop paying extra pension to stay below this line? (I have my iDeCo and NISA set up, as well as some other investments and assuming an inheritance some time well into the future, so I should be OK financially).
The simple answer is No.
There is a special Tax Deduction for Public Pensions, which reduces the Taxable Income, but Tax and Health Insurance will be withheld from the Pension payment.
Now, National Income Tax is levied at your Marginal Tax Rate in the year in which the Income is received after all deductions and allowances, but Residents' Taxes are levied at 10% on all Taxable Income after all deductions and allowances, and 5% on Capital Gains, on the previous year's declared Taxable Income (upto 18 months in arrears).
Your main deductions would be the Individual Deduction of Y480,000, Spouse Deduction of Y380,000, Y380,000 per Dependent and Y680,000 for any Dependent between 19 and 23, Insurance Premiums and iDECO Contributions, and the National Pension Deduction. Maybe also Mortgage Tax Relief, Medical Expenses over Y100,000, Furusato Nouzei, and any other deductions. Is that what you meant by the Y1M figure?
How much you receive will depend on the number of qualifying years, and whether you are on the Basic Pension or the Employee's Pension - Kosei Nenkin - or other.
Income from iDECO will also be taxable, though NISA Disbursments are completely tax free.
If you make less than the sum of all your allowances and deductions, then you are tax free, but remember that residents' taxes and health insurance premiums are based on the previous year's income.
There are three portions to the Kokumin Kenkou Hoken National Health Insurance Premium:
1. Basic Medical Care - Payable for All Household Members (Basic fund for the National Health Insurance)
2. Latter Life Care - Payable for All Household Members (Financial support for the Medical Insurance System for the Elderly Aged 75 and Over)
3. Long-Term Nursing Care - Payable for Household Members aged 40 to 64 (Nursing-care insurance premiums for people aged 40 to 64) (so not after 65).
Each portion consists of a Per Capita Premium and an Income Related Premium based on the total Household Taxable Income in the previous tax year, with an absolute maximum level for each portion per household. You should check the details for your Ward or City on their Website but my local Ward is currently set at these percentages of the previous year's total household Taxable Income, and maximum household premiums.
1. 8.00% - Household Maximum limit: 650,000 yen
2. 2.76% - Household Maximum limit: 220,000 yen
3. 2.58% - Household Maximum limit: 170,000 yen
You can apply for a reduction in premiums in case of real hardship.