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Table of contents:
Japanese businesses and investments
Kabushiki Gaisha and U.S. tax filing requirements
If you are the owner of a Kabushiki Gaisha (KK), you may be required to file Form 5471 with your U.S. tax return. Please see the following articles:
Interest from the Japanese post office and bank accounts
The regular post office accounts entries will show gross income and withholding tax (20.315%). Passbooks for bank accounts usually only show the net, so you must divide by 0.79685. For the United States, report the gross amount as income, then claim a Foreign Tax Credit (FTC) for the Japanese withholding tax.
Stocks in a brokerage account in Japan and U.S. tax filing requirements
If you simply hold the stocks in a brokerage account in Japan, it does not generate a tax obligation. However, if a taxable event occurs, such as receiving dividends or selling a stock, you must report this on your U.S. tax return.
Japanese pension (kōsei-nenkin)
If you receive Japanese pension (kōsei-nenkin) payments, you must report them on your U.S. tax return. However, if you pay tax in Japan on these distributions, the payments will count as a Foreign Tax Credit (FTC) toward your U.S. tax obligations.
Japanese income reporting
How to read a Japanese Tax Statement (Gensen Choshu Hyo)
A Gensen-Choshu-Hyo is the official tax form that you get from your employer. It outlines your earnings and the amount of taxes you paid during the calendar year.
A. Taxpayer's address
B. Taxpayer's name
C. Total salary earned during the year
Report the total amount of the annual gross salary:
Open your Tax Questionnaire and click the Configure Life & Income button on the left side.
Click Yes next to I receive payments from an employer.
Click Next Step and Submit.
Navigate to Income > Wages and click Yes to the question Did you receive payments during the tax year from a non-U.S. Employer?
Enter the gross salary amount to the question Gross wages/salary earned with this employer during the tax year? Utilize the income calculator to convert to calendar year.
D. Income after employment income deduction
E. Total income credit
F. Income tax withheld at source
The amount of foreign income tax paid or withheld. It can be utilized as a foreign tax credit to offset U.S. tax liability. Report tax imposed on the particular income type in the Taxes And Deductions > Taxes Paid section of the Tax Questionnaire.
Note: resident tax should be added to income tax when reporting foreign income tax paid/withheld.
G. Marital status and the spousal exemption
H. The number of dependents
This should include specific dependents (16-22 years old) and elderly dependents (70 and over). Report dependent children and other dependents:
Open your Tax Questionnaire and click the Configure Life & Income button on the left side.
Click Yes next to I have dependent children or other dependents.
Click Next Step and Submit.
Navigate to Personal Details > The Basics > Dependents.
I. Details of income credits
This includes social insurance, life insurance, earthquake insurance, mortgage, spouse's income, personal pension, and long-term accident insurance.
J. Date of employment and date of termination
K. Taxpayer's DOB
L. Employer's address
Report your employer's address in the Tax Questionnaire under Income > Wages.
M. Employer's name
Report your employer's name in the Tax Questionnaire under Income > Wages.
Notes:
The shown income tax withheld at source represents only the National income tax, excluding the resident income tax.
The resident tax is also withheld but is not shown. Add the resident tax paid to the amount of income tax on the Taxes And Deductions > Taxes Paid section of the TQ. If you have submitted other tax statements issued by your previous employers, all those earnings and withheld tax are also reflected and adjusted on this statement.
Q: What exchange rate should I use?
A: Optimizing currency for the client's benefit is a tool we use to help mitigate tax due. The Internal Revenue Service allows any published rate to be used as long as it is consistently applied throughout the return. However, for FBAR and FATCA, the rates must align with the Treasury rate.
Q: Am I subject to double taxation in Japan and the U.S.?
A: If your return is prepared correctly, there should be no double taxation in most cases. Tax treaties are involved, and any tax paid to Japan should be applied to your U.S. tax liability.
Q: Do I need to file if my salary gets paid by an employer in Japan?
A: Yes, you do. This certainly adds a bit of work to you or your tax accountant, but the impact on your taxes is likely minimal. There is a zero net effect for salaries less than USD $100,300 (for 2016). It is placed on the form first as a positive and then later on down the form as a negative.
Q: My spouse is not a resident and has no U.S. income. Do I need to get a U.S. Tax ID number for them?
A: No, but there are situations where it may be beneficial. Secondly, unlike Japan, you cannot claim your spouse as a dependent on your U.S. tax return. Moreover, if you are married, you are not allowed to file your tax return as a single taxpayer, but you don't have to declare your non-U.S. spouse's information.
Q: Am I required to report income from my Japanese spouse if my filing status is head of household?
A: No. You must only report your spouse's income if you file using a married filing jointly status. Please see Tax Implications of Foreign Spouse of a U.S. Citizen.
Q: Am I required to report my Japanese spouse's accounts that don't have my name on them?
A: No. You must report financial accounts on FBAR, an informational form with no tax due generated. If you are not a signatory on the account, you do not need to report them. See FinCEN Form 114 (FBAR) reporting.
Q: Can my spouse's parents be claimed as dependents?
A: Some rules must be met to qualify as dependents. One of the fundamental rules is that your parents or spouse's parents must have U.S. Social Security numbers or live in the U.S. Other conditions, such as their income, may be further considered to qualify them as your dependents.
Q: Am I allowed to claim a tuition deduction if I pay tuition to a Japanese school?
A: No. There are no provisions for this.
Q: Am I allowed to claim a deduction if I own a home in Japan and pay property taxes and mortgage interest?
A: Yes. The rules are the same as for homes in the United States. You can itemize deductions or claim the standard deduction (whichever is higher). Please see Standard vs. Itemized deductions on the U.S. tax return.
❗ Important note: property tax on foreign residence deduction was suspended through 2025.