Dependent Deduction

The dependent deduction is divided into four categories based on the dependent's age and cohabitation status. "General dependents" aged 16-18 and 23-69 receive a deduction of 380,000 yen. "Specified dependents" aged 19-22 are designed with university students in mind, and considering the burden of education costs, receive the highest amount at 630,000 yen. "Elderly dependents" aged 70 and over receive 580,000 yen if cohabiting and 480,000 yen if living separately. Note that children under 16 are excluded from the dependent deduction as they are covered by the child allowance system.

The requirements for qualifying as a dependent are: sharing the same household finances, having annual total income of 480,000 yen or less (1,030,000 yen or less if salary income only), and not being a full-time employee of a blue return filer's business. "Sharing the same household finances" does not necessarily mean living together - a parent living separately who receives financial support, or a child living alone for university, also qualifies. For dual-income couples, only one parent can claim the child's dependent deduction, so it is tax-advantageous for the higher earner to file the claim.

The most critical point regarding dependent deductions is the "1,030,000 yen threshold." If a dependent's part-time income exceeds 1,030,000 yen annually, they no longer qualify for the dependent deduction, increasing the parent's tax burden. For specified dependents (university students), losing the 630,000 yen deduction means a parent with a 20% income tax rate faces approximately 126,000 yen more in income tax, or about 189,000 yen including resident tax. If the child's part-time income only slightly exceeds 1,030,000 yen, the household's total take-home pay actually decreases - a "reversal phenomenon."

The elderly dependent deduction can be applied by claiming a parent living separately as a dependent. If the parent's pension income is 1,580,000 yen or less (for those aged 65 and over), the income requirement is met. Bank transfer records proving financial support can satisfy the "sharing household finances" requirement. Claiming a parent as a dependent provides not only the dependent deduction but also eliminates the parent's national health insurance premium burden (as they become a dependent under the child's social insurance). However, note that parents covered by the late-stage elderly medical system (age 75+) cannot become health insurance dependents.