In recent years, as prices have soared and the cost of living has risen, we’ve been hearing the term “households exempt from resident tax” more and more often.
Households exempt from resident tax are eligible for a wide range of benefits, including reduced out-of-pocket medical expenses, exemptions from long-term care insurance premiums,
and various subsidies from the national and local governments.
Against this backdrop, it seems an increasing number of seniors and their families are asking, “Is it possible to intentionally lower my pension payments just a little bit to qualify as a resident tax-exempt household?”
In this article, we’ll explain the “real mechanics of taxes”—including whether it’s possible to lower your pension, as well as common misconceptions regarding side jobs, property taxes, and compensation payments.
- 1. Is it possible to intentionally reduce your pension to become a household exempt from resident tax?
- 2. [The Pitfalls of the Side Hustle Boom] A Major Misunderstanding Hidden in the “200,000 Yen Side Hustle Rule”
- 3. Why Doesn’t “Property Tax” Go Down Even as the Building Ages? Suspicions of a Shocking Calculation Error
- 4. Are Compensation Payments from Traffic Accidents Taxable? Tax-Exempt Limits You Should Know
- 5. [Taxes on Religious Corporations] Why Are Shrine Amulets and Talismans Exempt from Consumption Tax?
- 6. Can executive compensation be freely adjusted once the company turns a profit?
- 7. The Truth Behind the Rumor That “Tokyo Metropolitan Government Is Hiding Its Financial Statements”
- Summary: The best approach to tax-related questions is to “check with an expert as soon as the question comes to mind.”
1. Is it possible to intentionally reduce your pension to become a household exempt from resident tax?
First, we will address the question that generates the most interest: “Is there a ‘secret trick’ to intentionally reducing your pension?”
[Conclusion] It is “impossible” to intentionally reduce your pension amount
To put it simply, it is absolutely impossible to intentionally reduce your pension benefits based on your personal preference.
A common misconception is that if you go to the Pension Office (formerly the Social Insurance Agency) and request, “Please reduce my monthly pension by 10,000 yen so that I become exempt from resident tax,” your request will be granted. However, this is impossible.
Public pensions (Basic Old-Age Pension and Employees’ Old-Age Pension) are calculated uniformly using a formula prescribed by law, based on the duration and amount of premiums paid in the past, as well as the portion proportional to earnings during one’s working years.
There is no system in place to arbitrarily reduce or adjust pension payments based on individual circumstances or a desire to become a “tax-exempt household.”
Why are so many people asking to have their pensions reduced?
The reason lies in the “pension income threshold” required to qualify as a household exempt from resident tax.
Generally, for single individuals aged 65 or older, if their pension income is “1.55 million yen or less” (the exact amount varies slightly by municipality, ranging from 1.48 million to 1.55 million yen), they are exempt from resident tax.
[Examples]
- Mr. A (pension income: 1.54 million yen): His household is exempt from resident tax, allowing him to receive numerous benefits.
- Mr. B (pension income: 1.56 million yen): Because his income exceeds the threshold by just 10,000 to 20,000 yen, his household is classified as “taxable,” resulting in higher out-of-pocket medical expenses and ineligibility for certain benefits.
As such, because the benefits one receives can change dramatically based on even a small difference in the amount, there is no end to the number of people who think, “In that case, I’d rather return 10,000 yen worth of my pension to the government.”
However, as mentioned earlier, such adjustments are not permitted.
The only legal adjustment option is “deferring or advancing the pension start date”
For the working generation and those not yet receiving a pension, the only way to control their future pension benefits is to “adjust the start date of pension payments.”
- Early Retirement (Receiving Benefits Early)
If you begin receiving benefits before age 65, your monthly pension amount will be reduced by 0.4% for each month you start early (4.8% per year). - Deferred Retirement (Receiving Benefits Later)
If you delay receiving benefits until age 66 or later, your monthly pension amount will increase by 0.7% for each month you delay (8.4% per year).
If you wish to “deliberately keep your future pension payments low in order to remain within the tax-exempt income bracket,” it is theoretically possible to “opt for early retirement, thereby keeping the amount received per payment low for the rest of your life,” provided you take your health and other factors into account.
However, once you opt for early retirement, your pension payments will remain reduced for the rest of your life, which poses a risk if you live a long life; therefore, careful financial planning is essential.
2. [The Pitfalls of the Side Hustle Boom] A Major Misunderstanding Hidden in the “200,000 Yen Side Hustle Rule”
With the recent boom in side hustles, information has been widely circulated stating that “if your side hustle income is 200,000 yen or less per year, you won’t owe any taxes.”
However, there is a pitfall here that many people overlook.
It’s not that “you don’t owe taxes,” but rather that “you simply don’t need to file a tax return.”
According to National Tax Agency rules, “Individuals with salary income from a primary job who earn 200,000 yen or less annually from a side hustle (profit after deducting expenses from revenue) are not required to file an income tax return.”
The key point here is that this merely states you “do not need to file an income tax (national tax) return”; it does not mean the tax itself is waived (zero).
There is no “200,000 Yen Rule” for Resident Tax
The most important point to note is that there is no rule for resident tax (local tax) stating that income of 200,000 yen or less is exempt.
Even if you do not file an income tax return, if you earn even 1 yen from a side job, you are obligated to file a separate “resident tax return” with your municipality of residence.
Failure to do so strictly constitutes a “failure to file a resident tax return.”
The higher your primary income, the higher the tax rate on your side job
Japan’s income tax system employs a “progressive tax rate,” where the tax rate increases as income rises.
Furthermore, income from side jobs (such as miscellaneous income) is generally subject to “comprehensive taxation,” where taxes are calculated by combining it with your main job’s salary.
Therefore, if someone earning a high salary from their main job also earns money from a side job, a high tax rate (up to 45% plus 10% resident tax) will be applied to that side income.
According to experts, a reasonable approach is to consider that “if your annual side-job income is around 210,000 to 250,000 yen, you might feel it’s ‘not worth the trouble’ given the hassle of filing a tax return and the tax rate. However, if you’re going to do it anyway, it’s better not to be constrained by the 200,000-yen threshold; earning more and paying taxes will ultimately leave you with more take-home pay.”
3. Why Doesn’t “Property Tax” Go Down Even as the Building Ages? Suspicions of a Shocking Calculation Error
If you own a home or an investment apartment, have you ever felt frustrated thinking, “The building must be getting old, yet the amount on the property tax notice I receive every year hardly ever goes down”?
In fact, there may be “a certain problem” on the part of local governments hidden here.
Are Calculation Errors Occurring in About 94% of Local Governments Nationwide?
This is a shocking revelation among tax experts: it is said that “approximately 94% of local governments nationwide may be making calculation errors or tax assessment mistakes regarding property taxes.”
Calculating property taxes is extremely complex.
Local government staff process vast amounts of data, including land shape, the application of special exemptions, and the valuation of building materials and equipment.
As a result, mistakes such as the following are currently occurring frequently.
- The reassessment (reduction in value) of the old building has not been properly reflected
- The “Special Provision for Small Residential Lots” (a measure that reduces the tax amount to a maximum of one-sixth) has not been applied
- Taxes are still being billed for a building that has already been demolished
If something seems off, contact your local government office within three months
When you receive your property tax bill, don’t just accept the information at face value—compare it with the previous year’s details.
Cases such as “The tax amount hasn’t changed at all, even though the apartment is 30 years old” are classic examples of calculation errors.
If you notice anything suspicious, we recommend visiting the Tax Division (or Property Tax Division) at your local city or ward office to verify the details and seek advice within three months of receiving the notice.
If an error on the part of the local government is discovered, you may be eligible for a refund (cashback) of any overpaid taxes retroactively (generally up to five years, or longer depending on the municipality).
4. Are Compensation Payments from Traffic Accidents Taxable? Tax-Exempt Limits You Should Know
If you are unfortunately involved in a traffic accident and receive “compensation,” “consolation money,” or “settlement funds” from the other party’s insurance company, what kind of taxes apply to these lump-sum payments
As a general rule, all “compensation for damages” is tax-exempt
In conclusion, no taxes (income tax or resident tax) are levied on compensation for damages or compensation for pain and suffering received as a result of a traffic accident.
All of these are tax-exempt.
Under the Income Tax Act, “compensation for pain and suffering received for physical or mental harm” and “compensation for damages arising from a tort” are interpreted not as profit (income) but as “compensation to make up for a loss,” and are therefore designated as non-taxable.
Note the difference from taxable “temporary income”
On the other hand, “maturity benefits” or “surrender refunds” received from life or health insurance policies you hold are treated as “temporary income” and are subject to taxation if they exceed a certain amount.
Even though both are “money received from an insurance company,” their tax treatment differs completely depending on whether it is “compensation for another person’s tort (non-taxable)” or “insurance benefits based on your own contract (taxable or non-taxable depending on the details).” Therefore, care must be taken not to confuse the two.
5. [Taxes on Religious Corporations] Why Are Shrine Amulets and Talismans Exempt from Consumption Tax?
“Amulets” and “talismans” purchased during New Year’s visits or other worship occasions. Few people may have considered the consumption tax (10%) when buying these items.
In fact, no tax is levied on them, but do you know why?
Amulets and talismans are not “sales of goods” but “donations and religious activities”
The reason amulets and talismans provided by shrines and temples (religious corporations) are tax-exempt is that they are treated not as “commercial sales of goods,” but as “donations to the gods and Buddhas or part of religious activities.”
The money we pay is not considered “payment for the amulet as an object,” but rather “first fruits or offerings (donations) for prayers performed by priests or monks, and for the divine protection of gods and Buddhas.” Therefore, it is exempt from consumption tax and corporate tax.
But what about “keychains” or “calendars”? Are they taxable?!
However, not everything is tax-exempt.
Even if sold by a religious corporation, products that are indistinguishable from general merchandise are subject to tax.
| Items | Tax Treatment | Reason |
| Amulets, Charms, and Temple Seals | Tax-exempt | Because it is strongly associated with religious activities and serves as an object of worship |
| Fortune slip | Tax-exempt | Since it is part of a Shinto ritual and fortune-telling ceremony |
| General calendars, postcards, and keychains | Taxable | Since it is considered “sales of goods (revenue-generating business)” in the same way as general stationery and souvenirs, |
As such, even if items look similar or are sold in similar locations, tax treatment is strictly determined based on whether they involve religious significance (such as prayer).
6. Can executive compensation be freely adjusted once the company turns a profit?
A common topic of discussion among small and medium-sized business owners and family-run corporations is “setting executive compensation levels.”
Is it permissible to make a change such as, “Since profits for this fiscal year look higher than expected, let’s increase the president’s salary (officer compensation) to reduce reported profits (and save on taxes)”?
[Conclusion] Changes cannot be made unless made within the first three months of the fiscal year
In conclusion, the ironclad rule is that corporate officer compensation “cannot be changed freely at any time.”
In order for officer compensation to be recognized as a business expense (deductible expense), it is generally necessary to follow the rule of “regular, fixed-amount remuneration.”
This rule requires that “the same amount must be paid every month.”
In principle, the only time you can change the amount is through a decision made at a shareholders’ meeting or similar body held “within three months of the start of the fiscal year (within three months of the fiscal year-end).”
Changes made after profits are realized are considered “profit manipulation”
If, during the fiscal year, you make changes such as: “Sales were good this month, so let’s increase executive compensation by 500,000 yen,” or “Let’s set it to zero since we’re in the red this month,” the company would be able to manipulate its profits (which are subject to corporate tax) at will.
The tax authorities strictly scrutinize such actions as “intentional profit manipulation.”
If executive compensation is increased after the first three months of the fiscal year, the increased amount will not be recognized as a business expense (deductible expense), and the company and the individual will both face the severe penalty of double taxation. Therefore, this must be avoided at all costs.
7. The Truth Behind the Rumor That “Tokyo Metropolitan Government Is Hiding Its Financial Statements”
On the internet and some social media platforms, there are occasional suspicions that “despite managing a massive budget, the Tokyo Metropolitan Government is hiding its financial statements by blacking out information or keeping them private.” Is this rumor true?
Conclusion: Tokyo Metropolitan Government’s Financial Statements Are Actually Published in Greater Detail Than Those of Other Local Governments
This rumor is a complete misunderstanding.
In reality, the Tokyo Metropolitan Government’s financial statements, budget documents, and reports on various projects are fully disclosed and available for anyone to view and download on the official website of the Tokyo Metropolitan Bureau of Finance and other platforms.
Why does the misconception that they are “being concealed” arise?
The Tokyo Metropolitan Government’s annual budget totals approximately 15 to 16 trillion yen (combined general and special accounts), a colossal sum comparable to the national budgets of countries like Sweden or Saudi Arabia.
Consequently, the volume of publicly available financial statements is so vast and technical that it is difficult for the general public to grasp the full picture at a glance.
It is believed that this “complexity of the information” and the “redactions in some disclosure requests (regarding personal information or security-related sections)” have been misrepresented, leading to the false rumor that “financial statements are being hidden.”
In terms of administrative transparency, the Tokyo Metropolitan Government actually practices advanced disclosure practices.
Summary: The best approach to tax-related questions is to “check with an expert as soon as the question comes to mind.”
As explained here, the “tricks” and “rumors” about taxes circulating among the general public are often based on misunderstandings and institutional barriers.
- Households Exempt from Resident Tax: You cannot apply to reduce your pension benefits based on personal preference.
- The 200,000-Yen Side Job Rule: Since you are not exempt from filing a resident tax return, it is important to have a clear understanding of the rules.
- Property Tax: Be aware that local governments may make calculation errors; if you suspect something is wrong, verify it within three months.
It’s not uncommon for a simple difference in whether you know how taxes and public systems work—or don’t—to result in a difference of several million yen over the course of your lifetime.
If you find yourself thinking, “Doesn’t this seem strange?” or “Isn’t there a better way to save money?”, the best way to protect yourself and the surest path to tax savings is to avoid relying too heavily on vague information found online and instead consult a trusted tax accountant or government office as soon as possible to verify the details.
