Charitable donations
Posted: Wed Feb 02, 2022 12:03 pm
This is a summary of the tax treatment of charitable donations in Japan. No, not the usual furusato nozei type in order that your family gets Yamato truckloads of free food and gifts. But the traditional, support a cause or charity you believe in type.
If you donate to certified NPOs, you can use the donations as a deduction against income tax by filing a tax return (確定申告). There are two options:
1. Using the charity donation tax deduction to reduce your taxable income (寄付金控除（所得控除）):
This is the traditional option. The deduction amount = total donated - 2000 yen. The amount you save on income tax then depends on your marginal income tax rate. Max donation limit is 40% of gross total income.
2. Using the special credit for donations to certified NPOs (寄付金特別控除（税額控除）):
This option has been available since 2011. Instead of reducing the taxable income, the method is to calculation the total amount of income tax due, then you can use the credit to reduce the amount of income tax you pay.
The credit amount = (total amount donated - 2000 yen) * 40%.
Max donation limit is 40% of gross total income and 25% of the initial total income tax due.
Option 2 is a fantastic system as it means people in the lower tax bands can still donate to charity and receive 40% of their donation back via lower income taxes. Option 1 is better for those with higher marginal tax rates, as then 40%+ may be returned to you. The great thing is NTA's online tax return filing system (確定申告書等作成コーナー) will suggest which of option 1 or 2 is best for you when doing your tax return
The above is just about national income tax. If the NPO is located in your prefecture or city, up to another 10% of the donated amount can be returned via lower inhabitant's (residents) taxes. The rules for which NPOs qualify for this vary by prefecture and city, so Google first if you want to save on your residents tax bill as well.
Both option 1 & 2 can be used in conjunction with furusato nozei. Just beware of the limits - ideally pre-calculate beforehand to make sure your total donations (furusato nozei + NPO) don't push you over them.
These are nice summaries in Japanese:
https://hoken.niaeru.com/media/social-s ... duction/2/
https://kifunavi.jp/procedure/hometown-tax/
TLDR: most tax payers in Japan can receive 40% back from donations to certified NPO charities by filing a tax return and paying lower income tax. More can come back if the charity is located in your city or if you are in a high marginal tax band. Beware of limits for the deductions, a good way to think about it is that is can charitable donations can share your furusato nozei donation limit (roughly).
If you donate to certified NPOs, you can use the donations as a deduction against income tax by filing a tax return (確定申告). There are two options:
1. Using the charity donation tax deduction to reduce your taxable income (寄付金控除（所得控除）):
This is the traditional option. The deduction amount = total donated - 2000 yen. The amount you save on income tax then depends on your marginal income tax rate. Max donation limit is 40% of gross total income.
2. Using the special credit for donations to certified NPOs (寄付金特別控除（税額控除）):
This option has been available since 2011. Instead of reducing the taxable income, the method is to calculation the total amount of income tax due, then you can use the credit to reduce the amount of income tax you pay.
The credit amount = (total amount donated - 2000 yen) * 40%.
Max donation limit is 40% of gross total income and 25% of the initial total income tax due.
Option 2 is a fantastic system as it means people in the lower tax bands can still donate to charity and receive 40% of their donation back via lower income taxes. Option 1 is better for those with higher marginal tax rates, as then 40%+ may be returned to you. The great thing is NTA's online tax return filing system (確定申告書等作成コーナー) will suggest which of option 1 or 2 is best for you when doing your tax return
The above is just about national income tax. If the NPO is located in your prefecture or city, up to another 10% of the donated amount can be returned via lower inhabitant's (residents) taxes. The rules for which NPOs qualify for this vary by prefecture and city, so Google first if you want to save on your residents tax bill as well.
Both option 1 & 2 can be used in conjunction with furusato nozei. Just beware of the limits - ideally pre-calculate beforehand to make sure your total donations (furusato nozei + NPO) don't push you over them.
These are nice summaries in Japanese:
https://hoken.niaeru.com/media/social-s ... duction/2/
https://kifunavi.jp/procedure/hometown-tax/
TLDR: most tax payers in Japan can receive 40% back from donations to certified NPO charities by filing a tax return and paying lower income tax. More can come back if the charity is located in your city or if you are in a high marginal tax band. Beware of limits for the deductions, a good way to think about it is that is can charitable donations can share your furusato nozei donation limit (roughly).
