Core answer: IIT = (salary − social insurance/housing fund − ¥5,000 standard deduction − special additional deductions) × rate − quick deduction. ¥10k/month salary with no special deductions pays only ~¥115/month.
How the tax is actually computed
Wages use cumulative withholding:
Current withholding = (cumulative taxable income × rate − quick deduction) − tax already withheld
Cumulative taxable income = cumulative income − cumulative social insurance/fund − cumulative standard deduction (¥5,000/mo) − cumulative special additional deductions − other lawful deductions
"Progressive" means each bracket's slice is taxed at its own rate — not the whole income at the top rate. The quick deduction is the built-in shortcut that spares you the segment-by-segment math.
The 7-bracket table (annual)
| Annual taxable income | Rate | Quick deduction |
|---|---|---|
| ≤ 36,000 | 3% | 0 |
| 36,000-144,000 | 10% | 2,520 |
| 144,000-300,000 | 20% | 16,920 |
| 300,000-420,000 | 25% | 31,920 |
| 420,000-660,000 | 30% | 52,920 |
| 660,000-960,000 | 35% | 85,920 |
| > 960,000 | 45% | 181,920 |
Special additional deductions checklist
| Deduction | Monthly | Key conditions |
|---|---|---|
| Children's education | 2,000/child | Parents split 50/50 or one takes 100% |
| Infant care (under 3) | 2,000/child | Same splitting |
| Elderly care | 3,000 | Only child: full; otherwise ≤1,500 each |
| Mortgage interest | 1,000 | First home only, max 240 months |
| Rent | 800-1,500 | 1,500 in major cities, 1,100 mid-size, 800 elsewhere |
| Continuing education | 400 | During degree programs |
| Serious illness | 80k/year cap | Annual reconciliation only; out-of-pocket above 15k |
Mortgage interest and rent are mutually exclusive; a couple working in the same city can claim rent only once.
Worked example: ¥15k/month, full year
Setup: salary ¥15,000, insurance+fund 17.5% (¥2,625/mo), only child claiming elderly care (3,000/mo) + mortgage interest (1,000/mo).
- Monthly taxable = 15,000 − 2,625 − 5,000 − 3,000 − 1,000 = 3,375
- Annual taxable = 3,375 × 12 = 40,500
- Bracket 2: 40,500 × 10% − 2,520 = 1,530
- Annual tax ¥1,530 (¥127.5/month average). WITHOUT the special deductions: (7,375×12) × 10% − 2,520 = 6,330 — filing deductions saves ¥4,800/year
Annual bonus: two taxation methods
The option runs through Dec 31, 2027 — choose either:
| Method | Algorithm | Best for |
|---|---|---|
| Separate | bonus ÷ 12 → find bracket; bonus × rate − QD | Salary already uses deductions fully, marginal rate ≥ 10% |
| Combined | bonus added to annual income | Lower salary, deductions not exhausted |
Example: ¥200k salary + ¥40k bonus, insurance+deductions ¥100k/year:
- Separate: salary (200,000−100,000)×10%−2,520 = 7,480; bonus 40,000×10%−210 = 3,790; total 11,270
- Combined: (240,000−100,000)×20%−16,920 = 11,080 — combined wins here, slightly
Verdict: no universal answer — try both in the tax app at reconciliation.
Annual reconciliation: refund or pay
March 1 - June 30 each year for the prior year. Typical refunds: special deductions not claimed during the year, mid-year job change duplicating the standard deduction, serious-illness medical expenses. Typical top-ups: two+ salary sources, heavy labor-remuneration share (withheld below the actual rate). Top-ups ≤ ¥400 or annual income ≤ ¥120k are exempt from filing.
Common mistakes
- "¥5,000 is a threshold — cross it and everything is taxed": wrong, it is a deduction — only the excess is taxed.
- "A bracket jump means earning more nets less": impossible. Progressive rates apply only to the slice entering the bracket; take-home always rises with gross.
- "Special deductions can wait until year-end": file in January and enjoy lower withholding monthly; year-end filing refunds you, but your cash sat with the tax bureau for a year.
- "Freelancers need not care": labor remuneration, author's fees and royalties are all comprehensive income, merged at the annual reconciliation.