Dependent tax deductions

[wayne1]

Bckground, I moved to Japan last year and a third-party firm ABC handled my tax returns. I'm now trying to figure out how they calculated the thing, specifically the dependent deductions.

Q1. I can't quite figure out why there's both national and local tax deductions. Can they both be applied together, or only the minimum of the two?

Q1a. If both of them can be applied, do they apply on the same amount? For e.g. I transfer 400k, and claim the max amount, 380k and 330k, on national and local tax respectively.

This feels like tax ~fraud~ shenanigans, but from looking at my return last year, it kinda seems like that's what ABC did.

Q1b. Also as a general question, if national and local tax deductions have overlapping sections (like the dependent deduction), can we use the same amount in both, instead of having to have different amounts in each?

Q2. I'm using machine translation for the webpage [1], which translates 同居老親等 as "Elderly parents living together". Looking at my tax return, ABC has classified this as the deduction amount for my grandparents. The thing is, a) they're not my parents, and b) they're not in Japan but, c) they are over 70 yrs and, d) they do live together with each other. Translating 同居老親等 word by word seems to imply they should be living with me. How is this going to be interpreted?

[1] https://www.nta.go.jp/publication/pamph/koho/kurashi/html/02_2.htm

Q3. There's no proration on dependent deductions, right?

 

[nobody2016]

@wayne1 Do you have a picture or pdf of the document you have to fill out?

 

[wayne1]

@nobody2016 I'm filing taxes myself, so it's just going to be the regular tax form. Also, it's next year, but meanwhile I was trying to figure out if I've sent enough back to max out the tax deductions, and only just looked at my tax return from this year (for 2022).

 

[kristhuy]

@wayne1

I can't quite figure out why there's both national and local tax deductions. Can they both be applied together, or only the minimum of the two?

Your (national) income tax liability and your (local) residence tax liability are calculated separately, using different deductions. For example, the standard dependent deduction for income tax purposes is 380,000 yen and the standard dependent deduction for residence tax purposes is 330,000 yen. So if your net income is 500,000 and you have no other deductions (ignoring the basic deduction for now), your taxable income for income tax purposes will be 120,000 yen while your taxable income for residence tax purposes will be 170,000 yen.

if national and local tax deductions have overlapping sections (like the dependent deduction), can we use the same amount in both, instead of having to have different amounts in each?

The value of deductions for income tax purposes and residence tax purposes are fixed by statute. When your income tax liability is calculated the income tax value of the deduction must be used, and when your residence tax liability is calculated the residence tax value of the deduction must be used.

Translating 同居老親等 word by word seems to imply they should be living with me. How is this going to be interpreted?

"同居老親等" would not be the correct classification for relatives living overseas. If the relatives are aged 70+, the correct classification would be 老人扶養親族・同居老親等以外の者. The appropriate deduction amounts would be 480,000 yen for income tax purposes and 380,000 yen for residence tax purposes.

There's no proration on dependent deductions, right?

No. As long as the person is dependent on you as of December 31, you are entitled to the full deduction.