Housing Loan Tax Exemption – Revision in fiscal 2022

The eligibility period for housing loan tax exemption has been extended for 4 years, while the deduction rate has been reduced to 0.7%. (Fiscal Year 2022 Tax Reform Outline released on Dec.10, 2021) 

Housing Loan Tax Exemption – What will change and how?

“Housing Loan Tax Exemption” is the system that the government allows new homeowners, who used housing loan, to basically deduct an amount equivalent to a certain percentage rate of the loan’s balance as of the end of the year from their income taxes (inhabitant taxes), to reduce their interest payment burden. The eligibility period of this tax exemption was scheduled to reach the deadline as of the end of 2021, but it will be extended for 4 years to 2025 (Those eligible for the tax exemption should move in their house by the end of 2025), while the exemption rate will be reduced from 1% to 0.7%.

In addition, the tax exemption period for newly built or resale houses will be extended from 10 years to 13 years (the period for preowned houses remains 10 years) and the upper limit of the annual total income of those eligible for the tax exemption will be reduced from the 30 million yen to 20 million yen.
* Those who have already been subject to the housing loan tax exemption will be continuously subject to the same deduction rate and upper limit.

The reason of such change is that the Government’s low interest rate policy has been continuing for a long time. As the result of the low interest policy, when you take out a housing loan at a lower interest rate than the tax exemption rate (1%), the exemption amount may be larger than the interest paid, and it may lead to use of unnecessary loans.

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