The tax commissions of the Liberal Democratic Party (LDP) and Komeito reached a basic agreement on Dec. 1 on a review of spousal tax deductions for households with housewives, finalizing the outline of this proposal. The cap on the wife’s income will be raised from the current 1.03 million yen to 1.5 million yen. Those with an income above 1.5 million, up to 2.0 million yen, will also be eligible for a certain amount of tax deduction. To compensate for the decrease in tax revenues as a result of this change, households where the husband has an income of over 12.2 million yen will not be eligible for spousal tax deduction.
The above will be included in the ruling parties’ outline of FY17 tax reforms for implementation from January 2018. The Finance Ministry estimates that some 3 million households will enjoy a tax cut, while around 1 million households will be paying higher taxes.
Under the new cap on the husband’s income, spousal tax deduction will be reduced in three stages to avoid a sharp increase in taxes. Those with income of up to 11.2 million yen will be eligible for the full tax deduction (380,000 yen). Above that, tax deduction for those with income of up to 11.7 million yen will be 260,000 yen, and for those with income up to 12.2 million yen will be 130,000 yen. There will be no tax deduction for those with income above 12.2 million yen. (Abridged)