Real Estate Capital Gains Tax and the ¥30 Million Special Income Deduction

Posted on July 11, 2025 in News

For the Sale of a Primary Residence in Japan

When you sell your primary residence in Japan, you may be eligible for a special income deduction of up to ¥30 million from your capital gains—regardless of how long you owned the property. This is known as the:

Special ¥30 Million Deduction for the Sale of a Primary Residence

居住用財産の譲渡所得の特別控除（3000万円特別控除）

Eligibility Criteria

To qualify for this special deduction, the property sold must fall into one of the following categories:

Your Current Residence
A house or apartment you are currently living in.
Your Previous Residence
A property you previously lived in. It must be sold by December 31st of the third year after moving out.
Note: It does not matter how the property was used after you moved out.
Land or Lease Rights
Land or lease rights sold together with the house or apartment described in 1 or 2.
Vacant Land After Demolition
Land on which a qualifying residence (as in 1 or 2) was demolished, provided all of the following conditions are met:
- The sales contract is signed within one year of demolition and by December 31st of the third year after moving out.
- The land was not used for any other purpose (e.g., paid parking) between demolition and the contract date.

Additionally, the deduction may be applied if the property was lost due to a natural disaster.

Other Requirements

You may not claim this special deduction if:

You have used this deduction or claimed special provisions for offsetting/carrying forward capital losses from the sale of a primary residence in the past two years.
You have applied the special exemption for replacement/exchange of a primary residence in the year of sale or either of the two preceding years.
You have used any other special tax exemptions (e.g., expropriation deduction) for the same property.
The property was sold to a related party (e.g., parent, child, spouse).

Important Notes

If you claim this special deduction, you cannot claim the Mortgage Loan Tax Credit 住宅ローン控除 for the same year and the following two years.
If you sell your previous primary residence within three years after moving into your new home and claim this special deduction, you will also be ineligible for the Mortgage Loan Tax Credit.

Exceptions

The deduction does not apply to the following types of properties:

A residence used only for the purpose of qualifying for the deduction.
Temporary residences, such as a rental during the construction of a new home.
Vacation homes or properties used primarily for recreation or leisure.

How to Apply

To claim this special income deduction, you must:

File a Japanese income tax return (確定申告), and
Submit the required supporting documentation.

Professional Guidance Recommended

Whether this deduction can be applied is a matter of professional judgment. To avoid overpaying when filing your capital gains tax return, it is essential to have the calculation and filing handled by a qualified tax professional.

For expert support with real estate capital gains tax filings, we highly recommend consulting our dedicated team of tax professionals specializing in property investments.