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How to use guide for employees

Year-end adjustment glossary

対象:
労務管理プラン(旧スモールプラン)人事・労務エッセンシャルプラン(旧スタンダードプラン)プロフェッショナルプラン¥0プランHRストラテジープラン

his page provides simple explanations regarding the year-end adjustment such as the meanings and purposes of its terminology and system, as well as the documents required for the procedures. If you wish to see more detailed content about this topic, please refer to the information page from the National Tax Agency link below.

Page containing detailed information about year-end adjustment | National Tax Agency

The total earnings amount requirements for various deductions were reviewed in FY2020 because of the tax reform. There are several changes, such as the newly established earnings amount adjustment deductions.

The content of this tax reform has been explained in a SmartHR Mag. article.

目次

Basic terminology

Income(収入)

This refers to the salary and bonus received from a company when working at a company, and the revenue from a store when self-employed and running a store or similar business.

Income also includes profit due to payment in the form of company housing, food, gift vouchers, and other non-monetary payments.

Earnings(所得)

"Earnings" is the amount after subtracting necessary expenses from income.

When working at a company, the monetary amount that results after subtracting the employment earnings deductible amount, the earnings amount adjustment deductible amount and the specified expenditure deductible amount from the income received from the company (the salary and bonus) is called "employment earnings."

Withholding tax(源泉徴収)

Earners must calculate, declare and then pay their own tax amount based on that year's earnings.

When an earner is working at a company, the company that pays their salary can subtract the income tax from the employee's salary and then pay it to the government on behalf of the employee. This is referred to as "withholding tax."

Year-end adjustment(年末調整)

The amount of income tax, etc. withheld as tax from one year's salary and bonus paid to the employee by the company is checked against the annual amount of tax that the employee needs to pay, and the procedure to adjust any excess or deficiency is referred to as "year-end adjustment."

An explanation is provided at「Types of deduction applications created during SmartHR year-end adjustment」on this page about documents to submit in order to declare the deductible amount.

Final tax return(確定申告)

While the year-end adjustment provides an exact calculation of the income tax for employment earnings, the final tax return provides an exact calculation of the income tax for all earnings that occurred in that year.

In principle, earners must file a final tax return. However, when working at a company, the year-end adjustment is used instead, which means that many people do not need to file a final tax return.

Please refer tot No. 2020 Final tax return | National Tax Agency for details about when it is necessary to file a final tax return.

Deductions(控除)

This word means "subtracting a fixed monetary amount from a certain amount." Correctly declaring deductions may reduce the amount of income tax and inhabitant tax you have to pay. An explanation is provided at「Types of deductions」on this page about the types of deductions related to the year-end adjustment.

Dependent relatives(扶養親族)

A dependent relative is a person who meets all the requirements below as of December 31 of that year.

  • A relative other than a spouse (a relative by blood within the 6th degree and a relative by affinity within the 3rd degree), or a child you have been charged to raise by the prefectural governor (meaning a foster child), or an elderly person you have been charged to care for by the mayor of the municipality
  • They are sharing living expenses with you (the taxpayer)
  • Their annual total earnings amount is 480,000 yen or less
  • They have never received payment in salary even once during that year as a family employee of a blue return taxpayer, or they are not a family employee of a white return taxpayer

Source:No. 1180 Dependent deductions | National Tax Agency

A spouse sharing living expenses(同一生計配偶者)

This refers to "a spouse who meets all the requirements below as of December 31 of that year" under the Income Tax Act.

A person with a common-law marriage status is not considered to be a spouse.

  • Sharing living expenses with you
  • Their annual total earnings amount is 480,000 yen or less
  • They have never received payment in salary even once during that year as a family employee of a blue return taxpayer, or they are not a family employee of a white return taxpayer

A spouse who qualifies for tax deductions(控除対象配偶者)

While sharing living expenses with your spouse, if your (the householder who receives deductions) total earnings amount is 10 million yen or less, your spouse is applicable as「a spouse who qualifies for deductions.」

A spouse who qualifies for elderly deductions(老人控除対象配偶者)

This refers to a situation when a spouse who qualifies for deductions is「70 years or older as of December 31 of that year.」

A spouse who qualifies for tax deduction at the source(源泉控除対象配偶者)

f your total earnings amount is 9 million yen or less and your spouse meets the following requirements, they are referred to as a「spouse who qualifies for tax deduction at the source.」

  • Sharing living expenses with you
  • Their annual total earnings amount is 950,000 yen or less
  • They have never received payment in salary even once during that year as a family employee of a blue return taxpayer, or they are not a family employee of a white return taxpayer

nformation for a spouse who qualifies for tax deduction at the source must be listed in the「Application for (Change in) Exemption for Dependents of Employment Income Earner.」However, this has no direct effect on the exact calculation of the year-end adjustment.

※It is used to withhold tax from an employee's salary and bonus paid by a company.

Types of deductions

基礎控除(Basic deductions)

This deduction is applied to all people with a total earnings amount of 25 million yen or less.

Basic deductions can be declared by listing the required information in the「Application for Basic Exemption of Employment Income Earner and Application for Exemption for Spouse of Employment Income Earner and Application for Exemption of Amount of Income Adjustment.」

Your total earnings amountDeductible amount
24 million yen or less480,000 yen
Between 24 million yen and 24.5 million yen inclusive320,000 yen
Between 24.5 million yen and 25 million yen inclusive160,000 yen
Over 25 million yen0 yen

給与所得控除(Employment earnings deductions)

This calculates the amount corresponding to expenses and deducts it based on the income amount from payment such as your salary and bonus.

The formula for calculating the employment earnings deductible amount is shown below.

Income amount from payment such as your salaryFormula for calculating the employment earnings deductible amount, or the deductible amount
1.8 million yen or lessIncome amount x 40% - 100,000 yen
(If this is less than 550,000 yen, the deductible amount is 550,000 yen)
Between 1.8 million yen and 3.6 million yen inclusiveIncome amount x 30% + 80,000 yen
Between 3.6 million yen and 6.6 million yen inclusiveIncome amount x 20% + 440,000 yen
Between 6.6 million yen and 8.5 million yen inclusiveIncome amount x 10% + 1.1 million yen
Between 8.5 million yen and 10 million yen inclusiveDeductible amount of 1.95 million yen (maximum amount)
Over 10 million yen

配偶者控除(Exemption for spouses)

This refers to the deductions you can receive based on your total earnings amount if you have A spouse who qualifies for tax deductions.

When the total earnings amount of the householder who will perform year-end adjustment is over 10 million yen, they cannot receive exemption for spouses.

Exemption for spouses can be declared by listing the required information in the「Application for Basic Exemption of Employment Income Earner and Application for Exemption for Spouse of Employment Income Earner and Application for Exemption of Amount of Income Adjustment.」

Your total earnings amountDeductible amount
A spouse who qualifies for tax deductionsA spouse who qualifies for elderly deductions
9 million yen or less380,000 yen480,000 yen
Between 9 million yen and 9.5 million yen inclusive260,000 yen320,000 yen
Between 9.5 million yen and 10 million yen inclusive130,000 yen160,000 yen

配偶者特別控除(Special exemption for spouses)

Even if you cannot receive exemption for spouses, you may be able to receive a fixed amount of deduction based on your spouse's earnings amount. This is referred to as「special exemption for spouses.」

The requirements for special exemption for spouses are shown below. *Bold text indicates the requirements that are different from exemption for spouses.

  • Sharing living expenses with you
  • Annual total earnings amount is between 480,000 yen and 1.33 million yen inclusive
  • They have never received payment in salary even once during that year as a family employee of a blue return taxpayer, or they are not a family employee of a white return taxpayer
  • Special exemption for spouses has not been applied to the spouse

Special exemption for spouses can be declared by listing the required information in the「Application for Basic Exemption of Employment Income Earner and Application for Exemption for Spouse of Employment Income Earner and Application for Exemption of Amount of Income Adjustment.」

In addition, when the total earnings amount of the householder who will perform year-end adjustment is over 10 million yen, they cannot receive special exemptions for spouses.

Also, a person with a common-law marriage status is not considered to be a spouse.

Spouse's total earnings amountYour total earnings amount and corresponding deductible amount
9 million yen or lessBetween 9 million yen and 9.5 million yen inclusiveBetween 9.5 million yen and 10 million yen inclusive
Between 480,000 yen and 950,000 yen inclusive380,000 yen260,000 yen130,000 yen
Between 950,000 yen and 1 million yen inclusive360,000 yen240,000 yen120,000 yen
Between 1 million yen and 1.05 million yen inclusive310,000 yen210,000 yen110,000 yen
Between 1.05 million yen and 1.1 million yen inclusive260,000 yen180,000 yen90,000 yen
Between 1.1 million yen and 1.15 million yen inclusive210,000 yen140,000 yen70,000 yen
Between 1.15 million yen and 1.2 million yen inclusive160,000 yen110,000 yen60,000 yen
Between 1.2 million yen and 1.25 million yen inclusive110,000 yen80,000 yen40,000 yen
Between 1.25 million yen and 1.3 million yen inclusive60,000 yen40,000 yen20,000 yen
Between 1.3 million yen and 1.33 million yen inclusive30,000 yen20,000 yen10,000 yen

扶養控除(Dependent deductions)

You can receive a fixed amount of deductions if you have Dependent relatives.

Dependent deductions can be declared by listing the required information in the 「Application for (Change in) Exemption for Dependents of Employment Income Earner.」

ClassificationDeductible amount
General dependent relatives who qualify for deductions ※1380,000 yen
Specified dependent relatives  ※2630,000 yen
Elderly dependent relatives ※3People other than elderly parents, etc. living together with you480,000 yen
Elderly parents, etc. living together with you ※4580,000 yen

※1:A dependent relative who is 16 years or older as of December 31 of that year.

※2:A dependent relative who qualifies for deductions and is between 19 and 23 years of age as of December 31 of that year.

※3:A dependent relative who qualifies for deductions and is 70 years or older as of December 31 of that year.

※4:「Elderly parents, etc. living together with you」refers to an elderly dependent relative who usually lives with you and is your or your spouse's parents or grandparents, etc. If the elderly relative has been hospitalized for a long time to receive treatment or is in a similar situation, the elderly relative is considered to be living together with you. However, if the elderly relative has entered a retirement home and they have a different address to you, they are not applicable for deductions.

所得金額調整控除(Earnings amount adjustment deductions)

This refers to the deductions you can declare for both you and your spouse when that year's income amount is over 8.5 million yen and any of the following requirements apply.

The person sharing living expenses with you or the dependent relative can be declared as being eligible for earnings amount adjustment deductions even if they are supported by an income earner other than you.

  • You are a person with special disabilities
  • The person sharing living expenses with you is a person with special disabilities
  • The dependent relative is a person with special disabilities
  • The dependent relative is under 23 years old

Earnings amount adjustment deductions can be declared by listing the required information in the「Application for Basic Exemption of Employment Income Earner and Application for Exemption for Spouse of Employment Income Earner and Application for Exemption of Amount of Income Adjustment.」

Formula for calculating the earnings amount adjustment deductible amount

[Amount of income such as from employment (Maximum amount of 10 million yen) - 8.5 million yen]×10%

障害者控除(Disabilities deductions)

This refers to deductions you can receive when you (the householder) or a spouse or dependent relative who you are sharing living expenses with has a disability. This can also be applied to dependent relatives under the age of 16 as long as the following requirements are met. Disabilities deductions can be declared by listing the required information in the「Application for (Change in) Exemption for Dependents of Employment Income Earner.」

ClassificationDeductible amount
Persons with disabilities270,000 yen
Persons with special disabilities400,000 yen
Persons with special disabilities who are living with you※750,000 yen

※Persons with special disabilities who are living with you refers to a person who always lives with you, is either a spouse or a dependent relative sharing living expenses with you, or a relative who is sharing living expenses with you or your spouse, and who qualifies as a person with special disabilities.

勤労学生控除(Working student deductions)

This deduction can be received when you are attending a school while holding a job. It can be received when all of the following apply as of December 31 of that year.

  • You have earnings from working such as employment earnings
  • Your total earnings amount is 750,000 yen or less and earnings from other than (1) above is 100,000 yen or less
  • You are a student at a specific school ※

※Please refer to No. 1175 Working student deductions | National Tax Agency for details.

Working student deductions can be declared by listing the required information in the 「Application for (Change in) Exemption for Dependents of Employment Income Earner.」

ClassificationDeductible amount
Working student deductions270,000 yen

ひとり親控除(Single parent deductions)

This deduction is provided for people who are raising children by themselves, regardless of their gender and their marital status. It can be received when the following apply as of December 31 of that year.

  • A child(*) is sharing living expenses with you
  • Your total earnings amount is 5 million yen or less
  • You do not have a partner in a common-law marriage

※Only when their total amount of earnings for that year (total earnings amount, resignation earnings amount and timber earnings amount) is 480,000 yen or less, except where they are a spouse or dependent relative who is sharing living expenses with a person other than you.

ClassificationDeductible amount
Single parent deductions350,000 yen

Single parent deductions can be declared by listing the required information in the「Application for (Change in) Exemption for Dependents of Employment Income Earner.」

寡婦控除(Widow deductions)

This deduction can be received if you have not remarried after divorcing or after your husband has passed away, and if it is unclear if your husband is dead or alive. You can receive this deduction when the following apply as of December 31 of that year.

  • If you are divorced
    • Your total earnings amount is 5 million yen or less
    • You are not married or in a common-law marriage after divorcing
    • You have dependent relatives
  • If your husband has passed away or it is unclear if your husband is dead or alive
    • Your total earnings amount is 5 million yen or less
    • You are not in a common-law marriage
ClassificationDeductible amount
Widow deductions270,000 yen

Widow deductions can be declared by listing the required information in the「Application for (Change in) Exemption for Dependents of Employment Income Earner.」

保険料控除(Insurance premium deductions)

This deduction can be received based on the insurance premium paid in that year.

During the year-end adjustment, you can declare four types of insurance premiums, including life insurance, earthquake insurance, social insurance and small business mutual aid premiums.

生命保険料控除(Life insurance premium deductions)

You can receive deductions for a life insurance premium, nursing care insurance premium and personal pension premium. The maximum total deductible amount for all three is 120,000 yen. Please refer to No. 1140 Life insurance premium deductions | National Tax Agency for details.

地震保険料控除(Earthquake insurance premium deductions)

You can receive deductions for earthquake insurance premiums and casualty insurance premiums (with requirements) related to certain long-term casualty insurance contracts, etc. The maximum deductible amount is 50,000 yen.

Please refer to No. 1145 Earthquake insurance premium deductions | National Tax Agency for details.

社会保険料控除(Social insurance premium deductions)

The full amount paid for a social insurance premium by a spouse or dependent relative who is sharing living expenses with you is deducted. There is no need to list your social insurance premium (the amount deducted from your salary) in documents that are submitted during the year-end adjustment. Please refer to No. 1130 Social insurance premium deductions | National Tax Agencyfor details.

小規模企業共済等掛金控除(Small business mutual aid premium deductions)

The full amount paid for a small business mutual aid premium, a defined contribution pension, or a mutual aid premium for supporters of people with physical and intellectual disabilities is deducted.

Please refer toはNo. 1135 Small business mutual aid premium deductions | National Tax Agency for details.

Types of deduction applications created during SmartHR year-end adjustment

Application for (Change in) Exemption for Dependents of Employment Income Earner(給与所得者の扶養控除等(異動)申告書)

Information about the salary received from a company is filled in this document to receive the following deductions.

  • Dependent deductions(扶養控除)
  • Disabilities deductions(障害者控除)
  • Widow deductions(寡婦控除)
  • Single parent deductions(ひとり親控除)
  • Working student deductions(勤労学生控除)

The name of this application form is sometimes abbreviated and referred to as 「Marufu(マルフ).」

Application for Basic Exemption of Employment Income Earner and Application for Exemption for Spouse of Employment Income Earner and Application for Exemption of Amount of Income Adjustment(給与所得者の基礎控除申告書 兼 給与所得者の配偶者控除等申告書 兼 所得金額調整控除申告書)

Information about the salary received from a company is filled in this document to receive the following deductions.

  • Basic deductions(基礎控除)
  • Exemption for spouses/Special exemption for spouses(配偶者控除/配偶者特別控除) ※You cannot receive both of these deductions at the same time
  • Earnings amount adjustment deductions(所得金額調整控除)

Application for Deduction for Insurance Premiums for Employment Income Earner(給与所得者の保険料控除等申告書)

Information about the salary received from a company is filled in this document to receive the following deductions. There is no need to fill out this application form if you do not have life insurance, earthquake insurance, small business mutual aid, etc.

  • Life insurance premium deductions(生命保険料控除)
  • Earthquake insurance premium deductions(地震保険料控除)
  • Social insurance premium deductions(社会保険料控除)
  • Small business mutual aid premium deductions(小規模企業共済等掛金控除)

The name of this application form is sometimes abbreviated and referred to as 「Maruho(マルホ).」

Application for Special Credit for Loans, etc. Related to a Dwelling (Specific Additions or Improvements, etc.) for Employment Income Earner(給与所得者の(特定増改築等)住宅借入金等特別控除申告書)

Information about the salary received from a company is filled in this document to receive housing loan deductions. Since it is not possible to perform year-end adjustment in the first year you receive housing loan deductions, you must file a final tax return.

You can continue to receive deductions using the year-end adjustment from the following year after filing the final tax return.

Other terminology

Joint liability(連帯債務)

When taking out a housing loan, one person is the main debtor while another person is designated as the joint debtor.

Example: When buying a property worth 50 million yen

  • The husband borrows 50 million yen as the main debtor
  • The wife is the joint debtor

For the above joint liability case, the married couple are both responsible for repaying the loan as debtors, which means that both the husband and the wife can apply for a housing loan deduction. If the wife is a 「joint guarantor,」the wife is not a debtor and so she cannot apply for a housing loan deduction.

Joint home loan(ペアローン)

When taking out a housing loan, both parties take out the housing loan and are designated as a joint guarantor for each other. Example: When buying a property worth 50 million yen

  • The husband and wife each borrow 25 million yen
  • They are a joint guarantor for each other

For the above joint home loan case, the married couple are both responsible for repaying the loan as debtors, which means that both the husband and the wife can apply for a housing loan deduction.