Hi all
My first year in Japan and I’m starting to question some income decisions. I am selling a house back in the USA early 2026 and will realize some significant cap gains.
My understanding is that Japan will want a piece of the tax pie, but I’m already paying taxes on the gains in the US, but will Japan also want some?
I’ve heard inheritance tax can be brutal if you’re living in Japan, but I had questions about overseas income. I also have some passive income from investments and I was wondering how those are treated.
I’m just salaried in Japan.
by AdEffective9559
3 comments
Don’t remit any money from the US to Japan in 2026 and you can avoid taxes in Japan on the sale. Wait until 2027 if at all possible.
Unless you’re on a spouse, long term resident or permanent resident SOR (status of residence), you won’t be liable for inheritance or gift tax originating abroad for your first 10 years.
TLDR: If you sell your house in 2026, avoid sending/bringing any money into Japan (including the use of foreign credit cards to pay Japanese companies) in 2026 and you will not owe any Japan income tax on the capital gains from the house sale or from any other foreign source income in 2026.
During your first 5 years in Japan, your income which is sourced outside Japan (e.g., your US house sale and investment income) will be taxable to the extent that is equal to the amount of any money from any source that you bring/send to Japan (including from the use of foreign credit cards in Japan).
The only way for income from your house sale and foreign investments in 2026 to be completely exempt from Japan income tax is if you don’t bring/send any money to Japan in 2026.
Also, keep in mind that the US and Japan have different rules for tax exemption of capital gains from sale of your principal residence. So if your capital gains are exempt according to the US rules, it doesn’t necessarily mean that they will also be exempt according to the Japan rules. They might be, but you’ll need to check to make sure.
Japan capital gains tax is a little more than 20%, so higher than the US. But it’s probably worse than that because if you bought your house when the exchange rate was lower than it is now, there will be “phantom gains”.
If you do owe both US income tax and Japan income tax on capital gains from your house sale and/or from your US investment income, you can apply foreign tax credits. In theory, foreign tax credits might reduce your taxes to the higher of the US taxes or Japan taxes. But in practice it doesn’t always work out quite that well and it might be a little higher than that.
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