U.S. expat taxes in Japan
As an American or green card holder living in Japan, taking care of your U.S. taxes can feel like a complicated task. Knowing which tax rules affect you and understanding your options is a lot to stay on top of.
With H&R Block, you can rest easy knowing you’ve found the right expertise for U.S. expat taxes in Japan. Whether you need expat tax guidance on filing from abroad or information on FATCA and FBAR rules, we’re here to help.
Ready to file your expat taxes? We’ve got a tax solution for you—whether you want to DIY your expat taxes or leave it to one of our experienced Tax Advisors. Head on over to our Ways to File page to choose your journey and get started.
What Americans living in Japan should know
For starters, Americans and U.S. green card holders living in Japan should continue to file a U.S. tax return each year. However, filing while abroad comes with new considerations and questions. “Do I have additional information to report to the IRS? How do my Japanese financial accounts affect my filing? What options do I have to reduce my tax bill?”
We’ve outlined a few considerations for U.S. citizens working in Japan, so you know what affects the tax you pay and which forms you need to file. Of course, tax rules for U.S. expats go beyond what we’ve listed below.
Need help? Our experienced tax advisors have seen it all and are here for you when you’re ready to tackle your taxes.
U.S. Expat Tax Filing Considerations
Working as an American in Japan can affect your taxes even if you don’t stay for very long. For example, if you earn income while on a short-term assignment, you’ll need to report that income on your U.S. taxes. As you establish deeper financial roots in Japan, you’ll have more considerations for your American tax filing.
You may need to report your Japan financial accounts and assets. Generally, U.S. taxpayers with more than $10,000 in foreign bank or financial accounts are subject to FBAR filing and reporting requirements. You may also be subject to FATCA reporting requirements if you have foreign assets valued at $200,000 and higher.
You can lower your U.S. bill and avoid dual taxation with certain tax strategies. Expats may take advantage of one of two options, detailed below, to lower their taxes.
- The foreign earned income exclusion allows you to exclude your wages from your U.S. taxes. This option is available to those who meet certain time-based residency requirements.
- The foreign tax credit lets you claim a credit for income taxes paid to a foreign government.
Depending on your level of income, either the foreign earned income exclusion or foreign tax credit may be more favorable for American expats in Japan. Your H&R Block tax advisor can confirm the best path for you.
Japanese Tax Filing Considerations
Your Japanese taxes are based on your residency status. Depending on how much time you spend in Japan and if you have a home there, you may be a nonresident, nonpermanent resident or permanent resident.
A resident is a person who has a domicile or resided in Japan for one year or more. There are two categories of residency:
- A non-permanent resident is anyone who is not a Japanese national and has resided in Japan for less than 5 of the last 10 years. They are taxed on all income except foreign-source income, unless the foreign-source income is paid or sent (remitted) to Japan.
- A permanent resident is a foreign or Japanese national, or a foreign national who resided in Japan for more than 5 years in the last 10 years. They are taxed on all income, regardless of where it’s earned.
A nonresident is a person who can’t be categorized as a non-permanent or permanent resident. Nonresidents are taxed on Japan-sourced income only.
The income tax rates are different for residents vs. nonresidents. Nonresidents are taxed at a rate of 20.42%. Resident income tax rates range from 5% to 45%. In addition to national income tax, individuals pay a surtax of 2.1% (this is included in the total nonresident tax rate) and residents pay a local tax of 10%. Nonresidents may also be subject to the local tax if they are registered as a resident as of January 1 of the current year.
Similar to taxes in the U.S., the percentage of tax residents pay increases as income increases. Comparably, the Japanese tax rates are higher, meaning many American expats in Japan would pay more in tax locally than in the U.S.
With this in mind, it’s typically better for most U.S. taxpayers to use the foreign tax credit. One of our experienced tax advisors can help determine the best choice for your situation.
2019 tax rates
|Tax rate||Taxable Income|
|¥97,500 + 10%||¥1,950,001 – ¥3,300,000|
|¥232,500 + 20%||¥3,300,001 – ¥6,950,000|
|¥962,500 + 23%||¥6,950,001 – ¥9,000,000|
|¥1,434,000 + 33%||¥9,000,001 – ¥18,000,000|
|¥4,404,000 + 40%||¥18,000,001 – ¥40,000,000|
|¥13,204,000 + 45%||¥40,000,001 –|
The tax season is similar to the U.S. tax year, but with a few differences. Japanese taxes follow a January to December tax year. Tax returns are due on March 15. However, if you’re a resident leaving Japan, your taxes are due before you depart.
How H&R Block can help Americans working in Japan
Are you a U.S. citizen living in Japan? H&R Block Expat Tax Services is here to help you get your U.S. taxes in order. With multiple ways to file, we’ve got a tax solution for you. Get started with our made-for-expats online expat tax services today!