Mortgage deduction extended for another five years
Japan's FY2026 tax reform extended the residential mortgage tax deduction from its previous 2025 expiration through December 31, 2030. The Ministry of Finance set borrowing limits according to the type and energy performance of a home for eligible residents moving into properties from 2026 through 2030. For example, qualifying certified newly built homes can have a borrowing limit of ¥45 million, a 0.7% deduction rate and a 13-year deduction period. The framework means that energy and certification classifications are increasingly relevant to the after-tax cost of buying a home.
Existing energy-efficient homes receive stronger treatment
A notable feature of the reform is expanded support for the resale market. Borrowing limits were raised for certain certified and ZEH-level energy-efficient existing homes, while enhanced treatment for households with children was extended to qualifying existing properties meeting energy-efficiency standards. The deduction period for certain energy-efficient resale homes was also extended to 13 years. A special 40-square-meter floor-area threshold has been broadened to cover existing housing, making property specifications more directly relevant to tax eligibility.
The deduction is not a general incentive for investment property
The mortgage tax deduction is designed for qualifying owner-occupied housing and should not be confused with a tax benefit available simply because someone invests in Japanese real estate. Non-residents and foreign buyers may face different outcomes depending on their residence, Japanese income-tax position, financing and the characteristics of the home. Investors purchasing units exclusively for rental operation should therefore separate investment-property taxation from owner-occupied mortgage incentives. For residents buying a resale home, however, obtaining reliable documentation of the property's energy performance may now have a direct financial impact.