Japan Expands Home Renovation Tax Relief System


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The government and the ruling coalition are considering extending a tax relief system to people who renovate their homes, people familiar with the matter said.

The home renovation tax break is set to expire at the end of this year, but government and ruling coalition officials plan to keep it in place until the end of 2023, the sources said.

The decision to extend the program aims to promote used home sales amid a spike in vacant homes across the country.

Under the tax breaks, people who renovate to make their homes energy efficient, barrier-free, or earthquake-resistant are eligible for income tax deductions.

A portion of the loans taken out to finance renovations is deducted from income tax, while for self-financed renovations, a portion of the construction costs is tax deductible.

For renovations meeting certain requirements, 2% of the outstanding year-end loans, or up to 250,000, can be deducted from income tax for five years. A 1% deduction for loans up to 10 million euros is available for other renovations.

For self-funded renovations, 10% of construction costs can be deducted from income tax, or up to 500,000 for homes meeting all requirements from earthquake resistance and energy efficiency to durability.

Government officials are also considering easing requirements for tax cuts on insulation-related renovations that make homes more energy efficient.

One plan under consideration is to require people to replace only some of their windows to improve insulation, instead of all windows as is currently required.

This move aims to promote energy efficient homes that do not require the intensive use of air conditioners.

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