Depreciation on a condominium (mansion) sale in Japan is the amount by which the building's value is deemed to have worn down between purchase and sale, and Japan's National Tax Agency (国税庁, Kokuzeichō, NTA) requires this amount to be subtracted from your acquisition cost before you calculate taxable capital gains. For an owner-occupied home, the formula is "building acquisition price × 0.9 × depreciation rate × years elapsed." For an investment property, it is the cumulative total of the depreciation expense you have already claimed as a rental-income deduction each year. For a reinforced-concrete (RC) condominium, the depreciation rate is 0.015 for an owner-occupied home and 0.022 for an investment property.
This is a distinctively Japanese calculation with no direct equivalent in most Western housing markets, and it catches many international owners off guard for a reason that has nothing to do with the math: Japan has no MLS-style public database of completed sale prices. In the United States, the UK, and Australia, a buyer or seller can typically look up what nearby comparable units actually sold for — through a multiple listing service, HM Land Registry price-paid data, or a state title registry. Japan has no equivalent. The Real Estate Information Network System (レインズ, REINS) that licensed agents use to share listing and transaction data is not open to the public, and even the aggregate market statistics this article cites later are published only as anonymized summaries, never as an individually searchable sold-price record. That absence of a public paper trail is exactly why the tax calculation in this article leans so heavily on your own purchase documents: there is no government database to fall back on if you cannot prove what you originally paid for the building.
This article is written for two audiences: people who are about to sell a condominium in Japan, and people who already hold one as a rental investment and file an annual return. We answer three questions with numbers, sourced directly from NTA publications: what depreciation rate applies to your property, how much gets subtracted from your acquisition cost, and what the resulting tax bill actually looks like. For investment owners, the second half of the article also covers the annual depreciation expense you can claim while you continue to hold the property. All figures reflect the law and published guidance as of August 2026. Japanese yen amounts are shown with an approximate US dollar conversion at ¥149 = US$1 (indicative rate as of 2026-08-16) — treat these conversions as illustrative only, since the actual rate moves daily.
Key points in this article
- For an RC condominium, the depreciation rate is 0.015 for an owner-occupied home (non-business use) and 0.022 for an investment property (business use). The same physical building produces a different number depending on how it is used.
- The owner-occupied formula includes a step that multiplies by 0.9; the investment formula does not. That single difference changes the depreciation amount by roughly 10%.
- As depreciation accumulates, your acquisition cost basis shrinks and your taxable capital gain grows. For an owner-occupied home, however, the ¥30 million (approx. US$201,300) special exemption frequently brings taxable capital gains to zero regardless.
- In our worked example, losing the original purchase contract and instead using the 5% deemed acquisition cost rule increased the tax bill by approximately ¥4.73 million (approx. US$31,740). Finding your old contract is the single highest-value thing you can do before a sale.
- Even for a resale condominium whose contract never itemized a building price, the NTA's "Standard Construction Cost Table" (建物の標準的な建築価額表) provides an official, government-sanctioned way to reconstruct the building's acquisition cost.
Where Depreciation Actually Matters in a Condo Sale
Depreciation affects exactly one calculation in a condominium sale: your acquisition cost (取得費, shutokuhi, the cost basis subtracted from the sale price). The acquisition cost you are allowed to subtract from the sale price shrinks by the amount of depreciation, which in turn increases the taxable capital gain (譲渡所得, jōto shotoku). Once you understand that single link, the rest of the depreciation discussion becomes much easier to follow.
The second point to understand is that land is never depreciated. Japanese tax law does not treat land as an asset that wears out with time, so the original purchase price of the land portion stays on your books unchanged, no matter how many decades you hold it. Only the building depreciates. In practice, this means the first real task in any depreciation calculation is splitting the purchase price of the condominium into a land portion and a building portion — a step that, as you'll see in the next section, is often harder than it sounds for a resale unit.
For a reader used to US, UK, or Australian tax practice, this land/building split will feel familiar in concept — most jurisdictions distinguish land value from improvement value for depreciation or capital-allowance purposes — but the mechanics of how Japan reconstructs that split when documentation is missing are unique to the Japanese system, and we walk through them step by step below.
How Depreciation Feeds Into Capital Gains Tax
The relationship between capital gains and acquisition cost comes down to two formulas:
- Capital gain = Sale price − Acquisition cost − Transfer expenses (− Special exemption)
- Acquisition cost = Land purchase price + (Building purchase price − Cumulative depreciation)
The NTA states explicitly that a building's acquisition cost is its purchase price minus the cumulative depreciation attributable to the ownership period (see NTA No. 3252, What Counts as Acquisition Cost). The longer you have owned the property, the larger the cumulative depreciation, and the smaller your acquisition cost becomes. This is precisely why so many long-term owners are surprised to owe tax even after selling for less than they originally paid — the mechanism isn't well known outside Japan, and frankly isn't well known among many first-time sellers inside Japan either.
The other point that trips people up is that the formula itself is different for an owner-occupied home versus an investment property. In NTA terminology, a building not used for business — typically your primary residence — is a "non-business-use asset" (非業務用資産, higyōmuyō shisan), while a building held out for rent is a "business-use asset" (業務用資産, gyōmuyō shisan). The next section lays out both sets of numbers side by side.
Condominium Depreciation Rate Tables: Owner-Occupied vs. Investment Property
The headline numbers: for a reinforced-concrete or steel-reinforced-concrete (RC/SRC) condominium, the depreciation rate is 0.015 if you lived in it as your home, and 0.022 if you rented it out as an investment. Below are the two rate systems in full, by structural material.
Non-Business-Use (Owner-Occupied) Depreciation Rate Table
This is the rate table used when selling a home, vacation property, or other building that was never used for business. The useful life for non-business use is set at 1.5 times the statutory business useful life (rounding down any fraction of a year), so for RC construction, 47 years × 1.5 = 70 years corresponds to a depreciation rate of 0.015.
| Building structure | Depreciation rate | Typical building type |
|---|---|---|
| Wood | 0.031 | Wood-frame apartment or detached house |
| Wood-frame with mortar exterior | 0.034 | Detached house with mortar cladding |
| (Steel-frame) reinforced concrete | 0.015 | Standard condominium unit (RC/SRC construction) |
| Metal frame ① (frame thickness ≤3mm) | 0.036 | Light-gauge steel low-rise apartment |
| Metal frame ② (frame thickness >3mm–4mm) | 0.025 | Light-gauge steel multi-unit residence |
Source: NTA "Capital Gains Breakdown Statement [Land and Buildings], for tax year Reiwa 7 (2025) and later" and NTA "How to File Capital Gains for Reiwa 7 (2025)," Reference 1.
Three things to watch for when using this table:
- The formula is "building acquisition price × 0.9 × depreciation rate × years elapsed." Forgetting the ×0.9 step is one of the most common calculation errors (see NTA No. 3261, Calculating a Building's Acquisition Cost).
- Years elapsed round up at six months and round down below six months. The holding period from acquisition to transfer is rounded to whole years, not months.
- Cumulative depreciation is capped at 95% of the building's acquisition price. No matter how old the building is, its acquisition cost never reaches zero under this method.
Business-Use (Investment) Statutory Useful Life and Straight-Line Depreciation Rate Table
A building held out for rent has its annual depreciation expense recorded as a deductible expense every year. This uses the statutory useful life and the corresponding straight-line (定額法, teigakuhō) depreciation rate.
| Building structure (residential) | Statutory useful life | Straight-line depreciation rate |
|---|---|---|
| Steel-reinforced concrete / reinforced concrete | 47 years | 0.022 |
| Brick, stone, or block construction | 38 years | 0.027 |
| Metal frame (thickness >4mm) | 34 years | 0.030 |
| Metal frame (thickness >3mm–4mm) | 27 years | 0.038 |
| Metal frame (thickness ≤3mm) | 19 years | 0.053 |
| Wood or synthetic resin | 22 years | 0.046 |
| Wood-frame with mortar exterior | 20 years | 0.050 |
If building fixtures and equipment (附属設備) are itemized separately from the building shell, use the following useful lives instead:
| Building fixtures and equipment | Statutory useful life | Straight-line depreciation rate |
|---|---|---|
| Water supply/drainage, sanitary, and gas fixtures | 15 years | 0.067 |
| Electrical fixtures (other) | 15 years | 0.067 |
| HVAC (compressor output ≤22kW) | 13 years | 0.077 |
| Elevators | 17 years | 0.059 |
| Escalators | 15 years | 0.067 |
When you purchase a single unit in a sectional-ownership condominium (区分所有マンション), the sale and purchase agreement almost never itemizes a separate price for fixtures and equipment. In practice, the default approach is to depreciate the entire building over 47 years. If you want to break out fixtures for a shorter useful life, you need supporting documentation for the itemized breakdown.
One more note on method: buildings acquired on or after April 1, 1998 may only use the former straight-line method or the current straight-line method — the declining-balance method (定率法, teiritsuhō) is not available. Building fixtures and structures acquired on or after April 1, 2016 (Heisei 28) may only use the straight-line method (see NTA No. 2100, Overview of Depreciation). You may come across explanations claiming that "buildings only moved to straight-line depreciation starting April 2016" — in fact, buildings themselves were unified onto the straight-line method eighteen years earlier than that; the 2016 change applied only to fixtures and structures.
For an investor comparing this to a US, UK, or Australian system: the underlying idea of a fixed statutory useful life per asset class is not unusual, but Japan's approach is considerably more rigid — there is no MACRS-style bonus depreciation or accelerated first-year allowance, and once you have chosen straight-line, you cannot switch methods to accelerate deductions in a particular year.
Owner-Occupied vs. Investment: A Side-by-Side Comparison
The same RC condominium is treated very differently depending on how it is used.
| Comparison point | Non-business use (owner-occupied) | Business use (investment/rental) |
|---|---|---|
| Useful life (RC) | 70 years (47 × 1.5, rounded down) | 47 years |
| Depreciation rate (RC) | 0.015 | 0.022 |
| ×0.9 in the formula | Yes | No |
| Annual expense deduction | Not available (calculated only at sale) | Available (deductible expense against rental income) |
| Depreciation cap | 95% of acquisition price | Down to a nominal ¥1 memorandum value (for assets acquired on or after April 1, 2007) |
| Effect on acquisition cost at sale | Subtract cumulative depreciation equivalent | Subtract cumulative depreciation actually claimed |
| ¥30 million special exemption | Available (if requirements are met) | Not available |
An owner-occupied home cannot generate an annual tax deduction, but it depreciates more slowly and carries the powerful ¥30 million (approx. US$201,300) special exemption at sale. An investment property can shelter rental income every year through depreciation, but its acquisition cost basis erodes faster, and the special exemption is off the table entirely. Neither structure is simply "better" — the real question is how you design the position through to the exit. For a foreign investor weighing a Tokyo pied-à-terre against a straightforward buy-to-let, this is often the deciding factor: an owner-occupied classification only helps if you can later document genuine residency, and switching a property's use partway through ownership changes which formula applies to which years.
Determining the Building's Acquisition Cost: A Three-Step Method
The starting point for any depreciation calculation is the building's acquisition price. Nothing else can proceed until this number is fixed. The NTA lays out a specific order of methods for establishing it — work through them from the top.
Step 1: Check Whether the Sale Contract Itemizes Land and Building Separately
This is the most reliable method. If your sale and purchase agreement or the accompanying price breakdown states "land: ¥X, building: ¥Y," use those figures directly. New-build condominium purchases frequently itemize this breakdown, so the first task is simply to locate your full set of purchase-time documents.
This is also the point where the absence of a public sold-price database matters most in practice. In many Western markets, if your own paperwork is incomplete, a public registry or an agent's MLS history can sometimes fill the gap. In Japan, no such public fallback exists — your own contract is, in most cases, the only authoritative record of what you paid, which is why we describe locating it as the single highest-leverage task in this entire process.
Step 2: Work Backward From the Consumption Tax Amount
Even if the contract doesn't state a building price, you can reverse-engineer it if you know how much consumption tax was charged on the building. Land sales are exempt from consumption tax in Japan, so any consumption tax charged on the transaction relates exclusively to the building.
Building acquisition price = Consumption tax paid on the building × (1 + consumption tax rate) ÷ consumption tax rate
| Purchase period | 1 + tax rate | Tax rate |
|---|---|---|
| April 1, 1989 – March 31, 1997 | 1.03 | 0.03 |
| April 1, 1997 – March 31, 2014 | 1.05 | 0.05 |
| April 1, 2014 – September 30, 2019 | 1.08 | 0.08 |
| October 1, 2019 – | 1.10 | 0.10 |
For example, if the consumption tax amount was ¥1.2 million (approx. US$8,050) and the purchase happened in 2020, the building's acquisition price is ¥1.2 million × 1.10 ÷ 0.10 = ¥13.2 million (approx. US$88,600). This method does not work, however, if you bought a resale unit from an individual seller, because individual-to-individual resale transactions are exempt from consumption tax in Japan — unlike a US residential resale, where sales tax generally isn't part of the transaction to begin with, so this particular quirk has no real analogue for a US buyer to compare it against. Also double-check that your contract date lines up with the correct historical rate, since transitional measures sometimes carried an older rate forward past its nominal cutoff.
Step 3: Use the NTA's "Standard Construction Cost Table"
If neither the contract nor the consumption tax amount gives you a usable figure, this is the last officially sanctioned method. The Ministry of Land, Infrastructure, Transport and Tourism (国土交通省, Kokudo Kōtsūshō, MLIT) publishes projected construction cost data through its Building Starts Statistics survey; the NTA converts this into a per-square-meter unit price, broken down by structural type and year of construction.
| Year built | Wood / wood-mortar | Steel-reinforced concrete | Reinforced concrete | Steel frame |
|---|---|---|---|---|
| 2008 (H20) | 156.0 | 229.1 | 206.1 | 158.3 |
| 2011 (H23) | 156.8 | 238.4 | 197.0 | 158.9 |
| 2013 (H25) | 159.9 | 258.5 | 203.8 | 164.3 |
| 2018 (H30) | 168.5 | 304.2 | 263.1 | 214.1 |
| 2019 (R1) | 170.1 | 363.3 | 285.6 | 228.8 |
| 2020 (R2) | 172.0 | 279.2 | 276.9 | 230.2 |
| 2021 (R3) | 172.2 | 338.4 | 288.2 | 227.3 |
| 2022 (R4) | 176.2 | 434.4 | 277.5 | 241.5 |
| 2023 (R5) | 204.1 | 366.7 | 314.3 | 281.1 |
Units are thousand yen per square meter — the figures in this table range roughly from ¥156,000/㎡ to ¥434,000/㎡, or approximately US$1,050 to US$2,910/㎡ at ¥149 = US$1. Source: NTA "Standard Construction Cost Table" (covers every year from 1959 (Showa 34) through 2023 (Reiwa 5)).
How you apply this depends on how you acquired the unit:
- If purchased new: Construction unit price for the build year × floor area = building acquisition price
- If purchased used (resale): (Construction unit price for the build year × floor area) − depreciation equivalent for the years between construction and your purchase = building acquisition price
For a condominium, you may use the exclusive-use floor area (専有部分の床面積) — the figure recorded in the property registry or the management association's bylaws works without adjustment. When you file, you check the "standard" (標準) box on the capital gains breakdown statement to indicate you used this calculated figure.
Useful Life Quick-Reference Table for Resale Condominiums
When you acquire a resale condominium as an investment property, you do not simply apply the full 47-year statutory useful life. Instead, you calculate the remaining useful life using a "simplified method" (簡便法, kanbenhō). The formula is (see NTA No. 5404, Useful Life of Used Assets):
- If part of the statutory useful life has elapsed: (Statutory useful life − years elapsed) + (years elapsed × 20%)
- If the entire statutory useful life has elapsed: Statutory useful life × 20%
- In both cases, round down any fraction of a year; if the result is under 2 years, the minimum is 2 years
Applied to an RC condominium (statutory useful life of 47 years) at various ages:
| Building age at acquisition | Simplified-method useful life | Straight-line depreciation rate |
|---|---|---|
| 5 years old | 43 years | 0.024 |
| 10 years old | 39 years | 0.026 |
| 15 years old | 35 years | 0.029 |
| 20 years old | 31 years | 0.033 |
| 25 years old | 27 years | 0.038 |
| 30 years old | 23 years | 0.044 |
| 40 years old | 15 years | 0.067 |
| Over 47 years old | 9 years | 0.112 |
Source: NTA No. 5404, Useful Life of Used Assets and the Useful Life Ministerial Ordinance, Appended Table 8.
The fact that a 40-year-old RC condominium depreciates at 0.067 — fully written off in just 15 years — is an important investment consideration. It lets you claim a large depreciation expense over a short window, but once that window closes, the expense disappears from your books and your acquisition cost basis for a future sale has already shrunk substantially. Note also that if you make capital improvements exceeding 50% of the acquisition price after purchase, you lose access to the simplified method and must fall back to the full statutory useful life.
For an investor comparing this to a US cost-segregation study or a UK capital-allowances claim: Japan's simplified method is far more mechanical — there is no engineering study, no component-level reallocation, and no discretion in the rate once the building's age is established. The trade-off is predictability: you can compute the exact depreciation schedule for a resale unit from public tables alone, without hiring a specialist.
Depreciation and Tax Simulation for a Condominium Sale
This section runs a complete calculation using real market data. The baseline is the June 2026 Tokyo-metro resale condominium report published by the East Japan Real Estate Information Network (東日本レインズ, Higashi-Nihon REINS): a closed sale price of ¥52.08 million (approx. US$349,500), exclusive floor area of 63.02㎡ (approx. 678 sq ft), a closing price of ¥826,400/㎡ (approx. US$5,550/㎡), 4,241 recorded transactions, and an average building age of 27.48 years (see Higashi-Nihon REINS, Market Watch Monthly Summary Report, June 2026).
It's worth pausing on what this REINS report actually is, because it illustrates the point made earlier about Japan's market transparency. This is an aggregate summary — average price, average size, transaction count — not a searchable list of individual addresses and sold prices. A US investor used to pulling comparable sales for a specific street from an MLS, or a UK investor used to HM Land Registry's price-paid data by postcode, will not find an equivalent tool for Japan. REINS itself, the underlying transaction database, is restricted to licensed real estate agents. This is precisely why this article leans on published statistics for context rather than a comparable-sales lookup, and why your own contract remains the primary evidence for what you paid.
Shared assumptions for all three examples below
- A new RC condominium was purchased in 2011 (Heisei 23) for a combined land-and-building price of ¥30 million (approx. US$201,300)
- Exclusive floor area of 63㎡; the sale contract did not itemize land vs. building, and the consumption tax amount is unknown
- Sold in 2026 for ¥52.08 million (approx. US$349,500); transfer expenses (agent commission, stamp duty, etc.) of ¥1.8 million (approx. US$12,080)
- 15 years elapsed between acquisition and transfer
Example 1: Owner-Occupied Home
Step 1: Split the price into building and land
Since the contract has no itemized breakdown, we use the Standard Construction Cost Table. The 2011 (Heisei 23) rate for RC construction is ¥197,000/㎡.
- Building acquisition price = ¥197,000/㎡ × 63㎡ = ¥12.411 million (approx. US$83,300)
- Land acquisition price = ¥30 million − ¥12.411 million = ¥17.589 million (approx. US$118,050)
Step 2: Calculate cumulative depreciation
Apply the non-business-use formula. The RC depreciation rate is 0.015.
- Cumulative depreciation = ¥12.411 million × 0.9 × 0.015 × 15 years = ¥2.513 million (approx. US$16,870)
95% of the ¥12.411 million building acquisition price is ¥11.79 million, so this depreciation amount is comfortably within the cap.
Step 3: Finalize the acquisition cost
- Building's remaining acquisition cost = ¥12.411 million − ¥2.513 million = ¥9.898 million (approx. US$66,430)
- Total acquisition cost = ¥9.898 million + ¥17.589 million (land) = ¥27.487 million (approx. US$184,480)
Step 4: Calculate the capital gain and tax
- Capital gain = ¥52.08 million − ¥27.487 million − ¥1.8 million = ¥22.793 million (approx. US$152,970)
- Apply the ¥30 million special exemption: ¥22.793 million − ¥30 million < ¥0 → Taxable capital gain: ¥0. Income tax and resident tax: ¥0.
Even though depreciation shaved ¥2.513 million off the acquisition cost, the final tax bill is zero. For an owner-occupied sale, the depreciation calculation frequently ends up having no effect at all on the tax actually owed. But the exemption is only available if you file a tax return — skip the filing, and the full ¥22.793 million becomes taxable. This is the single most commonly missed step in the entire process.
Example 2: Investment Property (Rented Out)
The same unit, but held as a rental, produces different numbers. The business-use formula skips the ×0.9 step, and the depreciation rate is 0.022.
- Cumulative depreciation = ¥12.411 million × 0.022 × 15 years = ¥4.096 million (approx. US$27,490)
- Acquisition cost = ¥30 million − ¥4.096 million = ¥25.904 million (approx. US$173,850)
- Capital gain = ¥52.08 million − ¥25.904 million − ¥1.8 million = ¥24.376 million (approx. US$163,600)
- Because the holding period exceeds 5 years as of January 1 of the sale year, this is long-term capital gain
- Tax = ¥24.376 million × 20.315% = approx. ¥4.95 million (approx. US$33,220)
The same property, the same sale price as Example 1, produces a tax bill of ¥0 versus roughly ¥4.95 million (approx. US$33,220). The gap is not just the difference in depreciation amounts (¥2.513 million vs. ¥4.096 million) — it's whether the ¥30 million special exemption is even available. Anyone modeling the exit on an investment condominium in Japan needs to build their return projection without that exemption in the picture. The reduced rate for holdings over 10 years is also restricted to owner-occupied homes, so it isn't available here either.
Example 3: What Happens Without the Original Purchase Contract
If you cannot establish your acquisition cost at all, you may use a deemed acquisition cost of 5% of the sale price (see NTA No. 3258, When You Don't Know Your Acquisition Cost). Using the same investment-property assumptions as Example 2:
- Deemed acquisition cost = ¥52.08 million × 5% = ¥2.604 million (approx. US$17,480)
- Capital gain = ¥52.08 million − ¥2.604 million − ¥1.8 million = ¥47.676 million (approx. US$320,000)
- Tax = ¥47.676 million × 20.315% = approx. ¥9.68 million (approx. US$64,970)
Compared with the ¥4.95 million tax bill in Example 2, that's a difference of approximately ¥4.73 million (approx. US$31,740) — purely a function of whether one piece of paper can be located. Even without the original contract, you may be able to prove your purchase price through a mortgage loan agreement, registration documents, bank transfer records, or transaction records retained by the brokerage that handled your purchase. This is exactly why, when a client first contacts us about selling, document recovery is where we start.
The full sale process — timeline, costs, and every fee involved — is covered separately in our complete guide to the condominium sale process, costs, and taxes.
Capital Gains Tax Rates and Special Provisions: How Much the Same Gain Can Vary
The tax rate on a capital gain depends on two things: how long you held the property, and whether it was your home. There are three tiers.
| Category | Holding period | Income tax | Resident tax | Combined rate |
|---|---|---|---|---|
| Short-term capital gain | 5 years or less | 30% (+0.63% special reconstruction income tax) | 9% | 39.63% |
| Long-term capital gain | Over 5 years | 15% (+0.315% special reconstruction income tax) | 5% | 20.315% |
| Reduced rate for holdings over 10 years (owner-occupied, portion up to ¥60 million) | Over 10 years | 10% (+0.21% special reconstruction income tax) | 4% | 14.21% |
| Reduced rate for holdings over 10 years (owner-occupied, portion above ¥60 million) | Over 10 years | 15% (+0.315% special reconstruction income tax) | 5% | 20.315% |
Holding period is judged as of January 1 of the year you sell. Sources: NTA No. 3208, Calculating Tax on Long-Term Capital Gains, No. 3211, Calculating Tax on Short-Term Capital Gains, and No. 3305, Reduced Rate Special Provision for Selling Your Home.
This "as of January 1" rule is the single most misunderstood point in the entire tax code around this topic. A property purchased in March 2021 and sold in May 2026 has, as of January 1, 2026, only been held 4 years and 10 months — which pushes the sale into the short-term bracket. Since the short-term rate (39.63%) is nearly double the long-term rate (20.315%), simply waiting a few months into the following calendar year can change the after-tax proceeds by hundreds of thousands of dollars on a large sale. This is one reason we ask clients to discuss timing with us well before a sale closes — unlike most Western jurisdictions, where the relevant date is usually the closing date itself, Japan's fixed January 1 anchor means the calendar, not the number of days you actually held the property, decides your bracket.
Key Exemptions Available for an Owner-Occupied Home
Even a carefully calculated depreciation figure means little if you overlook the exemptions available to you. Here are the ones used most often in practice:
- ¥30 million special exemption: Up to ¥30 million (approx. US$201,300) can be deducted from the capital gain on the sale of your home. The main requirements are that you sell by December 31 of the third year after you stopped living there, that the buyer is not your spouse, a lineal relative, or another person with a special relationship to you, and that you have not used this same exemption in either of the prior two years (see NTA No. 3302, Special Provisions When You Sell Your Home).
- Reduced rate for holdings over 10 years: Applies the reduced rates shown in the table above to the taxable long-term capital gain remaining after the ¥30 million exemption. It can be combined with the ¥30 million exemption.
- 5% deemed acquisition cost: The last resort when your acquisition cost is unknown. As Example 3 showed, this sharply increases the tax owed, so treat it strictly as a fallback, not a planning tool.
- ¥30 million exemption for inherited vacant homes: A special provision for selling a residence you inherited from a deceased relative. It comes with detailed requirements around seismic standards and a cap on the sale price, so eligibility needs to be checked case by case.
Every one of these exemptions requires you to file a tax return to claim it. The filing process and required documents are covered in detail in our guide to capital gains tax filing for real estate sales.
What Changes in 2027: The New Defense Special Income Tax
The Reiwa 8 (2026) tax reform creates a new "defense special income tax" (防衛特別所得税, bōei tokubetsu shotokuzei) set at 1% of income tax, while simultaneously reducing the special reconstruction income tax from 2.1% to 1.1%. This takes effect for income arising on or after January 1, 2027 (Reiwa 9) (see NTA, "Q&A on the Defense Special Income Tax and Special Reconstruction Income Tax (Withholding)," May 2026).
The important takeaway is that the internal composition changes, but the combined surtax stays at 2.1%. The overall combined rates — 20.315% for long-term gains and 39.63% for short-term gains — are expected to remain the same. If you're planning a sale for 2027 or later, you don't need to worry that the headline tax rate is about to move; only the accounting label behind the 2.1% surtax portion changes.
Depreciation While Holding an Investment Condominium: Annual Expense Claims
The rest of this article is for owners currently holding a rental condominium in Japan. Separate from the sale-time calculation above, this section covers the depreciation expense you claim on your annual tax return while you continue to own the property. The formula is simple: building acquisition price × depreciation rate.
New RC Condominium
Take a newly built RC condominium where the price breakdown is known: ¥20 million (approx. US$134,200) for the building and ¥5 million (approx. US$33,560) for fixtures and equipment. The annual depreciation expense works out as follows.
- Building: ¥20 million × 0.022 = ¥440,000/year (approx. US$2,950/year) (years 1–47)
- Fixtures: ¥5 million × 0.067 = ¥335,000/year (approx. US$2,250/year) (years 1–15)
- Combined annual depreciation, years 1–15: ¥440,000 + ¥335,000 = ¥775,000/year (approx. US$5,200/year)
- Year 16 onward: ¥440,000/year (approx. US$2,950/year) (fixtures fully depreciated; building only)
The disappearance of roughly ¥335,000 (approx. US$2,250) a year in deductible expense at year 16 is worth building into your cash-flow projections in advance. It also tends to coincide with the point at which water heaters, HVAC units, and similar equipment genuinely need replacing.
Resale RC Condominium
Now take a 10-year-old RC condominium with a building price of ¥10 million (approx. US$67,110) and fixtures priced at ¥2 million (approx. US$13,420). Use the simplified method to find the useful life.
- Building: (47 − 10) + (10 × 0.2) = 39 years → depreciation rate 0.026
- Fixtures: (15 − 10) + (10 × 0.2) = 7 years → depreciation rate 0.143
- Years 1–7: ¥10 million × 0.026 + ¥2 million × 0.143 = ¥260,000 + ¥286,000 = ¥546,000/year (approx. US$3,660/year)
- Years 8–39: ¥260,000/year (approx. US$1,745/year) (building portion only)
A resale property has a shorter useful life and therefore a higher depreciation rate, which means a larger tax-shielding effect in the early years of ownership. But as covered above, that faster depreciation also erodes the acquisition cost basis more quickly, which raises the eventual capital gain at sale. Our separate article on tax-saving strategy using depreciation and loss offsetting breaks down which income brackets this approach suits and which it doesn't.
For an investor coming from a US or UK cost-segregation mindset, this pairing — high early-year deductions offset by a faster-shrinking basis — will feel structurally familiar even if the specific mechanics (statutory tables instead of an engineering study) differ.
Repair Expense vs. Capital Expenditure
Spending on a property you hold splits into two categories: "repair expense" (修繕費, shūzenhi), which is deductible in the year incurred, and "capital expenditure" (資本的支出, shihonteki shishutsu), which is capitalized and depreciated over time. Restoring the property to its original condition or routine maintenance counts as repair expense; work that increases the building's value or extends its useful life counts as capital expenditure. As a rule of thumb, spending under roughly ¥200,000 (approx. US$1,340), or repairs performed on a cycle of roughly three years or less, can generally be treated as repair expense.
Drawing this line correctly sits at the intersection of tax law, legal classification, and construction knowledge. Our article on the combined tax, legal, and construction expertise real estate investment requires covers this in more depth, but as a practical matter, keep an itemized quotation for any borderline expense and confirm the treatment with a licensed tax accountant (税理士, zeirishi) before you file. As noted above, capital expenditure exceeding 50% of the acquisition price also affects your access to the simplified useful-life method for resale assets.
Small Depreciable Asset Exemption: Expanded to Under ¥400,000 in 2026
A taxpayer filing under the blue-form return system (青色申告, aoiro shinkoku) may expense small depreciable assets in full, in the year of purchase, up to an annual cap of ¥3 million (approx. US$20,130). The Reiwa 8 (2026) tax reform expanded this provision: the qualifying acquisition price threshold was raised from under ¥300,000 to under ¥400,000 (from approx. US$2,010 to approx. US$2,685), and the provision's expiration was extended three years, through the end of Reiwa 10 (March 31, 2029).
| Item | Before reform | After Reiwa 8 (2026) reform |
|---|---|---|
| Qualifying acquisition price | Under ¥300,000 | Under ¥400,000 |
| Annual cap | ¥3 million | ¥3 million (unchanged) |
| Maximum regular employees | 500 or fewer | 400 or fewer |
| Provision expires | March 31, 2026 (end of Reiwa 8) | End of Reiwa 10 (March 31, 2029) |
Source: Ministry of Finance (財務省, Zaimu-shō, MOF), "Outline of the Reiwa 8 (2026) Tax Reform," Section 3, Corporate Taxation (individual income tax carries an equivalent provision), and Small and Medium Enterprise Agency (中小企業庁, Chūshō Kigyō-chō, SME Agency), "The Small Depreciable Asset Exemption Has Been Expanded," May 2026.
A sole proprietor claiming this provision writes "措法28の2" (a reference to the relevant special taxation measures article) in the depreciation calculation section of the blue-form settlement statement. Taxpayers filing under the white-form return system (白色申告, shiroiro shinkoku) can still use the separate lump-sum depreciable asset provision, which allows assets priced between ¥100,000 and ¥200,000 (approx. US$670–US$1,340) to be depreciated evenly over three years (see NTA No. 2100, Overview of Depreciation).
One carve-out to flag: assets acquired on or after April 1, 2022 (Reiwa 4) that are used for a leasing business (unless leasing is your main business activity) are excluded from both this exemption and the lump-sum depreciable asset provision. Whether equipment installed in a rental property falls into this carve-out is sometimes a genuine judgment call, so for any large equipment purchase, confirm the treatment with a tax accountant before you commit.
What We Confirm With Clients Before a Sale
When a client first comes to us about selling a condominium, the very first thing we ask for — before we even discuss the asking price — is the original purchase documentation. As Example 3 showed, whether or not that contract exists can move the final tax bill by roughly ¥4.73 million (approx. US$31,740). That is a far larger swing than almost any negotiation over the listing price is likely to produce.
In practice, we confirm four things:
- The sale and purchase agreement and the pre-contract disclosure statement: the land/building breakdown, the consumption tax amount, and the purchase date.
- The certificate of registered matters and the building management association bylaws: the exclusive-use floor area and the year of construction — required information if you need to use the construction cost table.
- Occupancy history and the date you moved out: the ¥30 million special exemption has a hard deadline — December 31 of the third year after you stopped living there. If the property was ever rented out, we also confirm exactly how long.
- Acquisition date and planned sale timing: because the holding period is judged as of January 1 of the sale year, selling before or after the new year can change which tax bracket applies.
If the tax exposure looks likely to be significant, or if inheritance, co-ownership, or a like-kind replacement purchase is involved, we bring in a licensed tax accountant (税理士, zeirishi) early. Real estate transactions and tax treatment can't really be separated, but the tax determination itself belongs to the tax accountant's domain — not ours. We see our role as making sure clients have the information they need to make that decision themselves, well before closing. We believe that being transparent about unwelcome information — including a tax bill a client may not want to hear about — is what actually builds long-term trust, and that principle guides how we work with international clients just as much as domestic ones.
Summary: Four Things to Confirm Before You Sell
Four takeaways from this article on condominium depreciation in Japan.
- Confirm which category your property falls into. An owner-occupied RC condominium uses the 0.015 rate with the ×0.9 step; an investment RC condominium uses the 0.022 rate without it.
- Establish the building's acquisition price. Check, in order: an itemized contract breakdown, a reverse calculation from the consumption tax amount, and the NTA's Standard Construction Cost Table.
- Check exemption eligibility before anything else. For an owner-occupied home, the ¥30 million special exemption not infrequently brings the taxable capital gain to zero.
- Confirm your sale timing against the January 1 threshold. Crossing the 5-year or 10-year mark changes your tax bracket entirely.
The depreciation arithmetic itself is only three multiplications once you know the rate. The genuinely difficult parts are establishing the building's acquisition price and determining which exemptions apply — and, as this article has tried to show, in a market with no public sold-price registry to fall back on, getting those two things right from your own documentation is what actually maximizes what you keep at the end.
Related reading
- Capital Gains Tax Filing for Real Estate Sales in Japan: When It's Required, When It Isn't, and What Documents You Need
- Tax Return Guide for Japanese Real Estate Investment: Managing Cash Flow, Deductible Expenses, Depreciation, and the Blue-Form Decision
- Real Estate Exit Strategy in an Era of Inflation and Rising Construction Costs: Should You Sell or Hold?
Frequently Asked Questions
Q1. What is the depreciation rate for a condominium in Japan?
For an RC or SRC condominium, the rate is 0.015 if it was your home and 0.022 if it was a rental investment. A wood-frame building is 0.031 (non-business) or 0.046 (business); a light-gauge steel building is 0.036 or 0.025 for non-business use depending on frame thickness. Note that the rate changes based on how the property was used, not just its structural material.
Q2. Does land depreciate in Japan?
No. Land is not treated as an asset that loses value over time, so when you calculate your acquisition cost at sale, the land portion of the purchase price carries forward unchanged. Only the building and building fixtures depreciate.
Q3. What if the sale contract doesn't state a separate price for the building?
First check whether you can determine the consumption tax charged on the building — if so, reverse-calculate using "consumption tax amount × (1 + tax rate) ÷ tax rate." If the consumption tax amount is also unknown, use the NTA's Standard Construction Cost Table: multiply the per-square-meter unit price for the relevant construction year and structural type by the exclusive-use floor area. This is the NTA's own officially sanctioned method for this situation.
Q4. Can the depreciation calculation still result in zero tax owed?
Yes. Because the ¥30 million special exemption is available on the sale of an owner-occupied home, a capital gain of ¥30 million or less results in a taxable capital gain of zero. In Example 1 of this article, a capital gain of ¥22.793 million (approx. US$152,970) produced a tax bill of ¥0. Note that you must file a tax return to receive this exemption — without filing, you receive no deduction at all.
Q5. Do I need to file a tax return after selling?
Yes, if you realized a capital gain or you want to claim a special exemption. You file between February 16 and March 15 of the year following the sale, submitting your tax return along with the "Capital Gains Breakdown Statement [Land and Buildings]" (譲渡所得の内訳書). Required supporting documents typically include a copy of the sale contract, receipts for transfer expenses, a copy of your original purchase contract, and a certificate of registered matters.
Q6. Can I still depreciate a resale condominium older than its statutory useful life?
Yes. For an asset that has fully exceeded its statutory useful life, the useful life is calculated as "statutory useful life × 20%." For an RC building, that's 47 years × 20% = 9.4 years, rounded down to 9 years (a depreciation rate of 0.112). If the calculated result comes out under 2 years, the floor is 2 years.
Sources and References
- NTA No. 3261, Calculating a Building's Acquisition Cost (current as of April 1, 2025)
- NTA, "How to File Capital Gains for Reiwa 7 (2025)," Reference 1
- NTA, "Capital Gains Breakdown Statement (Attachment and Calculation Schedule to the Tax Return) [Land and Buildings], Reiwa 7 (2025) and later"
- NTA, "Standard Construction Cost Table"
- Ministerial Ordinance on Useful Life of Depreciable Assets, Appended Tables 1 and 8 (e-Gov Japanese Law Search)
- NTA No. 5404, Useful Life of Used Assets
- NTA No. 2100, Overview of Depreciation
- NTA No. 3208, Calculating Tax on Long-Term Capital Gains
- NTA No. 3211, Calculating Tax on Short-Term Capital Gains
- NTA No. 3302, Special Provisions When You Sell Your Home (¥30 Million Special Exemption)
- NTA No. 3305, Reduced Rate Special Provision for Selling Your Home
- NTA No. 3258, When You Don't Know Your Acquisition Cost
- NTA No. 3252, What Counts as Acquisition Cost
- Ministry of Finance, "Outline of the Reiwa 8 (2026) Tax Reform (3/9)," Section 3, Corporate Taxation
- SME Agency, "The Small Depreciable Asset Exemption Has Been Expanded" (published May 2026)
- NTA, "Q&A on the Defense Special Income Tax and Special Reconstruction Income Tax (Withholding)," May 2026
- Higashi-Nihon Real Estate Information Network System (東日本不動産流通機構, REINS), "Market Watch Monthly Summary Report, June 2026" (published July 10, 2026)
This article is based on laws and published guidance as of August 2026. Actual tax calculations and eligibility for any special provision depend on your individual circumstances. For a specific filing, please confirm the details with your local tax office or a licensed tax accountant. Japanese yen figures are shown with an approximate US dollar conversion for reference only (indicative rate of ¥149 = US$1 as of 2026-08-16); consult current exchange rates before relying on any dollar figure for planning purposes.
