RetireJapan

HI All
I am paying quite a bit of tax these days, my Father in law who is not living with us, is age 73 and barely getting by on his 100,000 Yen pension.. He was previously driving a Taxi but due to COVID-19 his company went bankrupt.. My wife suggested I add him as a dependent...

I currently have my daughter listed as a dependent, the company told me I was unable to include my wife as a dependent due to salary being high. My wife is included in the company health insurance, but I was unable to get a Tax deduction with her listed as a dependent.. I am doing IDECO and NISA, however paying a load of Tax. Just wondering would adding my Father in Law as a dependent reduce my Tax? He currently lives in Kobe and we live in Tokyo, he would need to move in with is to add him as a dependent? Has anyone done this sort of thing?

He doesn't need to be living with you, but in that case you would need to be supporting him financially by sending money.

concerned wrote: ↑Mon Nov 02, 2020 2:58 am HI All
I am paying quite a bit of tax these days, my Father in law who is not living with us, is age 73 and barely getting by on his 100,000 Yen pension.. He was previously driving a Taxi but due to COVID-19 his company went bankrupt.. My wife suggested I add him as a dependent...

I currently have my daughter listed as a dependent, the company told me I was unable to include my wife as a dependent due to salary being high. My wife is included in the company health insurance, but I was unable to get a Tax deduction with her listed as a dependent.. I am doing IDECO and NISA, however paying a load of Tax. Just wondering would adding my Father in Law as a dependent reduce my Tax? He currently lives in Kobe and we live in Tokyo, he would need to move in with is to add him as a dependent? Has anyone done this sort of thing?

I'm guessing you are aware. But your daughter only saves you on tax when she is 16 and over (From 19-23 the allowance is increased).
You mention your wife not giving you an allowance, "Due to salary being high" but you don't specify who's salary is high.
If yours that means you earn over about 12.2 mil or so. If their's then over 2.1mil.

Anyway, back to the subject at hand. This table shows the allowances for dependents.

https://moneliy.jp/life/tax/7244/2

The benefit isn't really that great. I try to remind my two 16+ kids that they bring little to the table in money terms. Speaking frankly, other than a robust theft deterrent for the sofa they serve no material purpose to the household whatsoever. But I digress.

So let's say AFTER your allowances you still have a significant amount of income over 9mil but less than 18 mil.
that will be taxed as income at 33% and you'll pay approx 10% resident tax.

So what does that table mean.
Well. Your daughter from age 19-23 would save you:
630,000 * .33 = 207,900 off you income tax bill.
and
450,000 * .10 = 45,000 off your resident tax bill. A total of 252,900 net more money to you.

You can see the same amounts for the old person over 70, cohabiting (58万 income tax allowance) and living elsewhere (48万 income tax allowance) so you do the calculations yourself.

Obviously if you are declaring significant income above 18mil the calculation is at 40% for income tax you'll avoid.

https://www.zeikin5.com/calc/

I just ran a recent year's 源泉徴収票 of my own on this calculator and found it highly accurate.
You could play with the little levers. I had all the allowances I'm likely to available myself of. For the first time ever I think I know what my tax bill is for this year before it's even over!

fools_gold wrote: ↑Mon Nov 02, 2020 5:41 am He doesn't need to be living with you, but in that case you would need to be supporting him financially by sending money.

Thanks! Fools_Gold, would make sense he live with us at some stage then to avoid sending money if he stays in Kobe

Moneymatters wrote: ↑Mon Nov 02, 2020 9:32 am

I'm guessing you are aware. But your daughter only saves you on tax when she is 16 and over (From 19-23 the allowance is increased).
You mention your wife not giving you an allowance, "Due to salary being high" but you don't specify who's salary is high.
If yours that means you earn over about 12.2 mil or so. If their's then over 2.1mil.

Thanks! Moneymatters, for the detail and the links. Yes my Salary is just over 12.2 Mil, my wife is about 1M
So unable to save money on Tax with my wife as dependent, and unable to save with my Daughter as she is 1.5 years old..
I am age 51 myself, so am not holding my breath till she turns 16 ....

This definitely makes sense and I think the tax savings are very substantial. You should of course be supporting anyone you claim as a dependent. For background, I see how people register for their tax dependents at the company and it is very common for elderly parents to be claimed as dependents.