“Inheritance tax is something only the wealthy pay.”
There may still be many people who think that way.
However, as of 2026, that perception is completely outdated.
The basic exemption for inheritance tax was significantly reduced as a result of the 2015 tax reform.
Consequently, the proportion of taxpayers subject to inheritance tax has increased to about 11 percent on a national average and to about 20 percent (roughly one in five people) in Tokyo.
In other words, we’ve reached a point where even ordinary households are required to file inheritance tax returns and pay the tax.
In this article, we’ll provide a clear explanation of the key factors to consider when determining whether you or your family members are subject to inheritance tax, the latest tax law changes you should be aware of, and steps you can take right away.
- Why is the number of people subject to inheritance tax skyrocketing even among ordinary households?
- 3 Key Points to Help You Determine Whether You Need to File a Tax Return
- What should you do when you receive a “tax return” from the tax office?
- [Important] When Do You Need to File a Tax Return Even If Your Tax Liability Is “0 Yen”?
- 3 Inheritance Tax Strategies You Should “Do Right Now” to Avoid Regrets
- Summary: “Early Planning” for Inheritance Tax Protects Your Family
Why is the number of people subject to inheritance tax skyrocketing even among ordinary households?
Why are ordinary households—which were previously thought to be “not affected”—now subject to inheritance tax? There are two main reasons, broadly speaking.
1. The basic deduction was cut by as much as “40 percent”
The primary factor was the 2015 amendment to the Inheritance Tax Act.
As a result of this amendment, the “basic deduction”—a tax-exempt threshold—was significantly reduced, as shown below.
- Through 2014: 50 million yen + (10 million yen × the number of statutory heirs)
- 2015 and later: 30 million yen + (6 million yen × the number of statutory heirs)
For example, if there are three heirs (a spouse and two children), the inheritance used to be tax-exempt up to 80 million yen.
However, it is now subject to taxation once it exceeds 48 million yen.
If you own a condominium or a single-family home in an urban area where land prices are high, it’s not uncommon for the combined assessed value of the building and land—along with even small amounts of savings and life insurance—to easily exceed the 48 million yen threshold.
2. Soaring real estate prices, particularly in urban areas
In recent years, real estate prices in urban areas—particularly in the Tokyo metropolitan area—have been on the rise. Even in the case of ordinary homes purchased for
personal residence, there have been numerous instances where the assessed value (such as the roadside land value or property tax assessment) has increased since the time of purchase, causing the value to exceed the basic deduction limit without the owners even realizing it.
3 Key Points to Help You Determine Whether You Need to File a Tax Return
To determine whether you need to file an inheritance tax return in the event of your own death or that of a family member, you need to have a clear understanding of the following three points.
Point 1: Does the “total asset value” at the time of death exceed the basic deduction?
Inheritance tax is calculated based on the total value of all assets owned by the decedent (the deceased person) as of the “date of death.”
The main types of property covered are as follows.
- Real estate (land and buildings where you live, rental properties, forest land, etc.)
- Financial assets (cash, bank deposits, securities such as stocks and mutual funds)
- Deemed Inherited Assets (Life Insurance Proceeds, Death Benefits)
- Other (automobiles, precious metals, antiques, golf memberships, etc.)
Particular attention should be paid to “life insurance proceeds (death benefits).” Even if the beneficiary is listed as a family member (heir), if the deceased paid the premiums, the proceeds are included in the calculation of inheritance tax as “deemed inherited property.”
Since insurance companies are required to report payment information to the tax office, it is impossible to keep this information hidden from the tax office.
Point 2: The period for which lifetime gifts are taken into account will be gradually extended to “7 years”
While “inter vivos gifts” have been widely used as a strategy for inheritance tax planning, the rules governing them have been tightened due to tax reforms.
Previously, only lifetime gifts made “within three years prior to death” were included in the calculation of the estate; however, due to a revision in the law, the period for inclusion will be gradually extended to “seven years.”
As of 2026, we are in a transitional period, and the carryback period is currently being extended in stages. Since the strategy of making small gifts over many years to reduce taxes is becoming less effective, more systematic planning is required.
Point 3: The tax office has a fairly good grasp of individuals’ financial situations
It is extremely dangerous to think, “If I don’t file a tax return, won’t it go unnoticed?”
The tax office utilizes advanced information networks, such as the “National Tax Integrated Management (KSK) System,” and has an extremely accurate understanding of individuals’ financial circumstances.
The main types of information that the tax office can investigate and obtain are as follows.
- Bank account transaction history covering the past few years to several decades
- Trading Data for a Securities Account
- Real Estate Registration Information and Sales History
- Life Insurance Payment Statement
- Accounts held in a family member’s name (those suspected of being so-called “nominee accounts”)
Even if there was no malicious intent, if an omission in your tax return is discovered, you will be subject to penalties such as “additional taxes” and “late payment penalties” in addition to the taxes you are required to pay.
What should you do when you receive a “tax return” from the tax office?
About six months after the death of a family member, you may receive a document titled “Guidance on Inheritance Tax Filing and Related Matters”—sometimes referred to as the “inheritance tax fortune slip”—along with the tax return form from the tax office.
If you receive this notice, it means the tax office has determined—based on real estate registration records and past income data—that “this household is highly likely to be subject to inheritance tax.” If you
receive this document, do not ignore it; instead, immediately recalculate the details of your assets or consult a professional.
Furthermore, you cannot simply assume that everything is fine just because you did not receive the documents. Since there is a possibility that the tax office may not have fully accounted for all your cash assets or may have overlooked something, it is essential that you conduct an accurate assessment of your assets yourself.
[Important] When Do You Need to File a Tax Return Even If Your Tax Liability Is “0 Yen”?
The inheritance tax system includes powerful special provisions and deduction schemes that can significantly reduce the amount of tax owed.
- Special Provisions for Small-Scale Residential Land: A system that allows for a reduction of up to 80% in the assessed value of land on which one’s primary
residence is located - Spousal Tax Reduction (Spousal Deduction)
: A system under which up to 160 million yen (or the statutory share of the inheritance) of the assets inherited by a spouse is tax-exempt.
In many cases, taking advantage of these programs can result in a final tax bill of “0 yen.”
However, there is one very important point to note here.
That is, these special provisions are subject to the condition that “the inheritance tax return be filed by the deadline.”
If you assume, “Since the tax will be zero if I use the special provision, I don’t need to file a return,” and simply ignore the matter, you may be denied the application of that special provision and end up being billed for a massive inheritance tax bill that you wouldn’t have had to pay otherwise. Keep in mind that even if
the tax amount is zero, the filing process itself is still mandatory.
3 Inheritance Tax Strategies You Should “Do Right Now” to Avoid Regrets
To avoid panic when an inheritance arises, it’s important to start preparing while you’re still alive.
Here are three specific steps you can take starting today.
1. Make a list of all your assets
First, let’s start by getting a clear picture of your current financial situation.
- Real Estate (Check the Certificate of Registered Matters and the property tax bill)
- Financial Assets (Organizing Bank Accounts, Recording Transactions in Passbooks)
- Life Insurance (Verification of Insurance Policy, Verification of Beneficiary)
- History of Past Gifts (When, to Whom, and How Much Was Given)
By creating a list, you can discover “forgotten assets” and “unexpected increases in value” that you hadn’t noticed before.
2. Prevent Inheritance Disputes by Drafting a “Will”
Drafting a will is the most effective way to prevent disputes over the division of an estate among surviving family members.
While you can draft a handwritten will on your own, we recommend preparing a “notarized will” or consulting with a professional, such as a judicial scrivener or administrative scrivener, to avoid any formal deficiencies. Involving a
professional ensures that the settlement of assets—which family members often overlook—proceeds smoothly.
3. Consult a “tax accountant specializing in inheritance matters” as soon as possible
Calculating inheritance tax—particularly the “valuation of real estate”—is a highly specialized field, and the assessed value can vary significantly depending on factors such as the shape of the land and how it borders the road.
If you try to calculate your taxes on your own, you run the risk of overpaying taxes or, conversely, failing to report certain amounts and facing additional tax assessments.
If you have even the slightest suspicion that you might exceed the basic deduction, we recommend consulting a tax accountant who specializes in inheritance matters as soon as possible.
Summary: “Early Planning” for Inheritance Tax Protects Your Family
Inheritance tax is no longer limited to just a select few wealthy individuals. With the reduction of the
basic exemption and the tightening of rules governing lifetime gifts, we have entered an era where anyone could be affected.
- First, take inventory of your assets to determine their total value.
- Understand that you are still required to file a tax return even when using a special provision.
- Make arrangements for a will and consult with professionals while you are still alive
Taking these steps early on is the first step toward “proper estate planning,” which will reduce your future tax burden and protect your loved ones.
