To ease the financial burden on families, Japan's FY2026 tax reform expands the general life insurance premium deduction for households with dependents under 23. The maximum deduction for new life insurance policies has been raised from JPY40,000 ($250) to JPY60,000, offering targeted tax relief to families raising children
For salaried workers who received deduction certificates from insurers in October and have begun preparing for the year-end tax adjustment, the change in how declaration forms must be filled out is drawing attention.
The reform is built on four pillars: increasing the basic deduction amount, raising the minimum guaranteed employment income deduction, updating dependent income limits, and introducing a special life insurance premium deduction for taxpayers with dependents under 23. The basic deduction will be adjusted periodically to reflect inflation, using the consumer price index growth rate from the two most recent years as the basis for the calculation.
Accordingly, the minimum guaranteed amount of the employment income deduction and the income requirements for dependents have also been raised in tandem.
Under the previous framework, the life insurance premium deduction was split into three distinct categories: general life insurance, nursing care insurance, and individual pension insurance. While each category carried an individual deduction limit of JPY40,000, the total combined deduction across all three was capped at JPY120,000.
The increase under this reform applies only to the new general life insurance premium portion for taxpayers with dependent relatives under age 23. The caps for nursing care insurance premiums, new individual pension insurance premiums, and premiums under the old system for life insurance and old individual pension insurance remain unchanged, and the overall deduction cap of JPY120,000 also stays the same.
While the reform enhances the disposable income of households with children, deduction criteria remain contingent upon the age and income of dependents. Consequently, verifying eligibility is imperative as household structures evolve. As the deadline for year-end tax adjustments approaches, many households in the country are reviewing their insurance premiums and dependent statuses.