Taxes on selling a condo differ depending on whether you owned it for more or less than 5 years, and whether it was your primary residence. This article organizes the tax rate categories and the conditions for special deductions, case by case.
- If your sale generates a capital gain (jōto shotoku), income tax and resident tax apply.
- The guideline rate is roughly 20.315% for a long-term capital gain (over 5 years of ownership) and roughly 39.63% for a short-term capital gain (5 years or less).
- Selling your primary residence may qualify you for a special deduction of up to ¥30 million from your capital gain, if requirements are met.
- A reduced tax rate may also apply to a primary residence owned for more than 10 years.
- Whether a special provision applies depends on individual circumstances, so it's best to confirm with a tax accountant or the National Tax Agency.
Understanding Capital Gains (Jōto Shotoku)
A capital gain refers to the profit portion left after subtracting the acquisition cost (the original purchase price and related expenses) and transfer expenses (such as the brokerage commission) from the selling price. It's calculated as: Capital gain = selling price − (acquisition cost + transfer expenses), and income tax and resident tax are levied on this capital gain — not on the full selling price. It's worth keeping in mind that the entire selling price doesn't become taxable income.
Case 1: Tax Rate Categories for Ownership of Over 5 Years vs. 5 Years or Less
The tax rate on a capital gain is categorized based on how long you'd owned the property as of January 1 of the year you sold it. If your ownership period exceeds 5 years, it's a long-term capital gain, with a guideline rate of roughly 20.315% (15% income tax + 0.315% special reconstruction income tax + 5% resident tax). If 5 years or less, it's a short-term capital gain, with a guideline rate of roughly 39.63% (30% income tax + 0.63% special reconstruction income tax + 9% resident tax). Since the ownership period alone nearly doubles the tax rate, it's an important factor to weigh when considering the timing of a sale.
Case 2: Whether the Special Deduction Applies Depends on Primary Residence Status
If you sell your primary residence (a home you actually lived in), there's a special provision — the "¥30 million special deduction for a primary residence" — that lets you deduct up to ¥30 million from your capital gain, provided certain requirements are met. If this deduction applies and your capital gain is ¥30 million or less, you may owe no tax at all. That said, there are conditions — for instance, it doesn't apply to sales between family members in certain cases — so it's worth confirming. Note that this special deduction doesn't apply to properties that weren't your primary residence, such as an investment condo; the standard tax rate applies directly to the capital gain in that case. (A separate provision applies to an inherited family home, so see also our article on selling an inherited home.)
The Reduced Tax Rate for Ownership Over 10 Years
If you sell your primary residence and your ownership period exceeds 10 years as of January 1 of the sale year, there's a special provision that applies a further reduced tax rate on top of the ¥30 million special deduction. It applies a lower-than-standard rate to the portion of your capital gain up to ¥60 million. There are detailed rules governing how this can be combined with other special provisions.
When a Final Tax Return Is Required
If selling your condo generates a capital gain, you'll need to file and pay tax through a final tax return the year after the sale. Final tax return season generally runs from mid-February to mid-March, and you can file either at a tax office window or online via e-Tax. Note that even when using a special provision such as the ¥30 million deduction — including cases where the resulting capital gain is zero or negative — you still need to file a final tax return for the provision to apply. There's also a loss offset provision available if you incur a capital loss instead.
Where to Get Tax Advice
Tax rules come with detailed requirements and exceptions, and whether a provision applies depends on individual circumstances. What's covered here is a general overview of the system; for an actual filing, we recommend confirming your specific case with a tax accountant or the National Tax Agency (the National Tax Agency website or a tax office consultation window).
Frequently Asked Questions
What exactly is a capital gain (jōto shotoku)?
It's the profit portion left after subtracting the acquisition cost (such as the original purchase price) and transfer expenses (such as the brokerage commission) from the selling price. Income tax and resident tax are levied on this portion.
Can anyone use the ¥30 million special deduction?
It's a special provision available when selling your primary residence (a home you actually lived in), provided certain requirements are met. There are cases where it doesn't apply, such as sales between family members, so it's worth confirming the details with a tax accountant or the National Tax Agency.
How is the tax rate decided?
If your ownership period as of January 1 of the year you sell exceeds 5 years, it's treated as a long-term capital gain (roughly 20.315% as a guideline); if 5 years or less, it's a short-term capital gain (roughly 39.63% as a guideline).
Summary
If selling your condo generates a capital gain, you'll owe income tax and resident tax, and the rate depends on how long you owned the property. Special provisions such as the ¥30 million deduction and the reduced rate for over 10 years of ownership may be available, but whether they apply depends on individual circumstances, so it's best to proceed while confirming details with a tax accountant or the National Tax Agency.