Tax Deductions in Japan: How Expats Can Claim Medical and Dependent Expenses

Did you know you can lower your Japanese tax bill by claiming expenses for medical care and family support? We explain exactly how to utilize the Medical Expense Deduction and the Dependent Deduction for relatives living abroad, helping you maximize your refund this tax season.

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Why You Are Probably Paying Too Much Tax

Living in Japan comes with many financial responsibilities, from paying your residence tax to keeping up with social insurance premiums. When you look at your monthly payslip, it is easy to feel like a significant portion of your hard-earned salary is disappearing into the government’s coffers. However, the Japanese tax system is actually designed with several “relief valves” that many foreign residents completely overlook.

If you are just letting your company handle your taxes automatically without asking questions, you are likely overpaying. The system relies on you to declare your own eligible expenses. Two of the most powerful tools available to expats are the Medical Expense Deduction (Iryo Hi Kojo) and the Dependent Deduction (Fuyo Kojo) for family members living overseas.

Understanding these rules can result in tens of thousands, sometimes even hundreds of thousands of yen returning to your pocket. Whether you are supporting aging parents back home or have had a year with high dental or hospital bills, this guide will walk you through the process of reclaiming your money.

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The Medical Expense Deduction Explained

Health insurance in Japan is excellent, usually covering 70% of your costs. However, that remaining 30% co-pay can add up quickly if you have a chronic condition, need dental work, or have a sudden hospitalization. The Japanese government allows you to deduct these excess costs from your taxable income.

What Qualifies for the Deduction?

It is not just about hospital visits. The scope of the Medical Expense Deduction is surprisingly broad.

• Treatment costs: Fees paid to doctors, dentists, chiropractors, and acupuncturists (for therapeutic purposes).
• Medicines: Prescription drugs and some over-the-counter medicines.
• Hospitalization: Room and board charges during a hospital stay.
• Transportation: Bus, train, and taxi fares used specifically to travel to and from the hospital.
• Childbirth: Costs related to delivery and regular checkups.

The Magic Number: 100,000 Yen

To claim this deduction, your total out-of-pocket medical expenses for the year (January 1 to December 31) generally need to exceed 100,000 JPY.

• Note: If your total income is less than 2 million JPY, the threshold is 5% of your income instead of 100,000 JPY.

Whatever amount you pay over this threshold can be deducted from your taxable income, up to a maximum of 2 million JPY. This reduces your income tax and your residence tax for the following year.

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Tracking Your Medical Expenses

The key to claiming this deduction is organization. You cannot claim what you cannot prove.

Every time you visit a clinic or a pharmacy, you receive a receipt. Do not throw these away. Keep a specific envelope or box for “Medical Receipts.”

What About Transportation?

You usually do not get a receipt for a short train ride or bus trip to the clinic. For these expenses, you should keep a simple Excel spreadsheet or notebook. Record the date, the route (e.g., “Shinjuku Station to Yoyogi Hospital”), the cost, and the reason for the visit. The tax office generally accepts this detailed log as proof.

Family Costs Count Together

You can combine the medical expenses of your spouse and children with your own. If you pay for your child’s braces or your spouse’s surgery, add those to your total. Often, one person in the household earns more than the others; it is usually most beneficial for the highest earner to claim the deduction to maximize the tax relief.

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The Self-Medication Tax System

What if you rarely go to the doctor but spend a lot on drugstore medicine? There is a separate system called the Self-Medication Tax System.

If you purchase specific over-the-counter (OTC) medicines (often marked with a specific logo on the box), and your total spend exceeds 12,000 JPY in a year, you can deduct the excess amount.

• Limit: You can deduct up to 88,000 JPY.
• Condition: You must undergo a regular health checkup or vaccination to qualify.

Important: You cannot use both the standard Medical Expense Deduction and the Self-Medication Tax System. You must choose one. Usually, if your total medical bills are over 100,000 JPY, the standard deduction is better. If you only bought cold medicine and painkillers totaling 30,000 JPY, the Self-Medication route is your only option.

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Supporting Family Abroad: The Dependent Deduction

For many expatriates, the Dependent Deduction is the single most valuable tax break available. Japan allows you to claim a tax deduction for relatives you support financially, even if they live in a different country.

This deduction lowers your taxable income, which in turn lowers your Income Tax and Residence Tax. Depending on your income tax bracket, claiming just one dependent could save you 50,000 to 100,000 JPY or more in actual cash per year.

Who Qualifies as a Dependent?

• Relatives: Parents, grandparents, children, or siblings.
• Age: They generally must be 16 years or older (rules for children under 16 changed recently as they are covered by child allowance).
• Income: The dependent must have low income (generally under 1.03 million JPY per year if they were in Japan, though strict foreign income caps are applied loosely, the main criteria is that you are supporting them).

Changes in 2023

Japan tightened the rules recently. For adult dependents aged 30 to 69, you can generally only claim them if:

1. They are studying abroad (students).
2. They are disabled.
3. You send them at least 380,000 JPY per year for living expenses.

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How to Prove You Support Them

The tax office will not just take your word for it. You need concrete documents attached to your tax return or given to your employer.

1. Proof of Relationship

You need an official document showing how you are related.

• Birth certificates.
• Marriage certificates.
• Family registers (from your home country).
• Note: These documents usually need a Japanese translation attached. You can often translate them yourself if you are capable.

2. Proof of Remittance (Sending Money)

This is where many expats fail. You must show that you actually sent money to each person you are claiming.

• Bank Transfer Slips: Showing the recipient’s name.
• Remittance Service Statements: Receipts from services like Wise (formerly TransferWise) or Western Union.

The “One-for-One” Rule

If you support your mother and your father, you cannot just send one lump sum to your father and say, “Please share it with Mom.” You need to make separate transfers to each person. You need a transfer slip with your father’s name and a separate transfer slip with your mother’s name. Without this paper trail, the tax office will likely reject the second dependent.

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How Much Can You Deduct?

The amount you can deduct from your taxable income varies based on the age of the dependent.

Dependent Category	Age of Dependent	Deduction Amount (Income Tax)
General Dependent	16 – 18 years old	380,000 JPY
Specific Dependent	19 – 22 years old	630,000 JPY
General Dependent	23 – 69 years old	380,000 JPY
Elderly Dependent	70 years or older	480,000 JPY (580,000 if living with you)

Note: These figures are for National Income Tax. The deduction amounts for Residence Tax are slightly lower.

The Filing Process: Employees vs. Freelancers

How you claim these deductions depends on your employment status.

For Company Employees (Salaried)

You can handle the Dependent Deduction through the “Year-End Tax Adjustment” (Nenmatsu Chosei) in December. Your company will give you a form called “Report on Exemption for Dependents.” You attach your remittance slips and relationship documents and hand them to HR. They recalculate your tax, and you get the refund in your December paycheck.

However, the Medical Expense Deduction CANNOT be done through the Year-End Adjustment. You must file a separate “Final Tax Return” (Kakutei Shinkoku) at the tax office (or online via e-Tax) between February 16 and March 15 of the following year.

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For Freelancers and Business Owners

You will claim both deductions when you file your mandatory Final Tax Return (Kakutei Shinkoku) in February/March. You simply enter the details in the relevant sections of the tax forms.

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Common Mistakes to Avoid

1. Waiting Until the Last Minute

Getting birth certificates from your home country or finding translations takes time. Do not wait until March 14th to start looking for documents.

2. Hand-Carrying Cash

If you go home for Christmas and hand your parents cash, the Japanese tax office will not accept this as “remittance.” You need a bank trail. If you use credit cards (giving your parents a family card), you need strict proof that you paid the bill and they used it for living expenses. Bank transfers are much safer.

3. Losing Medical Receipts

As mentioned, no receipt means no deduction. Even if you paid 500,000 JPY for surgery, if you lost the paper, you get nothing.

Using e-Tax to Simplify the Process

Japan has been pushing its digital tax filing system, “e-Tax.” It allows you to file your return from your smartphone or computer.

If you have a My Number Card and a card reader (or a compatible smartphone), you can link your medical data. Some hospitals and pharmacies automatically upload your payment data to the “My Number Portal,” which then syncs with e-Tax. This saves you from manually entering every single receipt. It is a game-changer for the Medical Expense Deduction.

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Conclusion

Taxes in Japan can seem overwhelming, but they are not rigid. The system acknowledges the burden of healthcare costs and the reality of supporting family members, even those across the ocean.

By taking the time to organize your medical receipts and ensuring your remittances to family are done correctly, you can legally and significantly reduce your tax burden. Think of it this way: that tax refund could be your plane ticket home to see the very family you are supporting. Don’t let that money slip away.

Disclaimer

This article is for general informational purposes only and does not constitute professional advice. Laws, prices and regulations vary by location and change over time. Consult a qualified professional for guidance on your specific situation.