Closing day gets all the attention — the deposit, the registration fees, the moment the keys change hands. But buying a home in Japan doesn't end the bills; it starts a new, recurring one. Every year for as long as you own the property, you'll owe local property taxes, and unlike the one-time buying costs, these never go away. This guide walks through what the two annual taxes are, how they're calculated, the reductions that usually make the real bill smaller than the headline rate suggests, and where to find your actual numbers.
The two annual taxes, and their rates
Homeowners in Japan pay 固定資産税 (kotei shisan zei, fixed-asset tax) every year, and — if the property sits in an urbanisation-promotion area (市街化区域), which most residential land in and around cities does — a second tax called 都市計画税 (toshi keikaku zei, city-planning tax) as well.
- 固定資産税: a standard rate of 1.4% of the 固定資産税評価額 (assessed value) of the land and building.
- 都市計画税: up to 0.3% of the same assessed value, with the exact rate set by each municipality.
Both are assessed by the municipality, billed together, and typically mailed out in spring. You can usually pay in one lump sum or in four installments spread across the year. The bill you receive each year is the one place to see exactly what your municipality has decided your property is worth and what you owe — more on that later.
Assessed value, not market price
The single most important thing to understand is that these taxes are never calculated on what you paid for the home. They're calculated on the 固定資産税評価額, a government-assessed value that is usually well below market price. As a rough guide, assessed land value tends to run around 70% of market value, and an assessed building value tends to run around 50–60% of construction cost. The building portion also depreciates over time in the assessment as it ages, while the land portion is tied to a separate revaluation cycle that happens every three years. So your tax bill can shift even if you do nothing to the property, simply because the municipality has updated its valuation.
The residential-land reduction: why the real number is usually much lower
The headline rates above look larger than what most homeowners actually pay, because of a major reduction for land under a residential building: 住宅用地の特例 (jūtakuyōchi no tokurei). For the portion of land up to 200㎡ — called 小規模住宅用地, small-scale residential land — the taxable base used for 固定資産税 is cut to just one-sixth, and the base for 都市計画税 is cut to one-third. For any portion of land above 200㎡ (一般住宅用地), the reduction is smaller: one-third for 固定資産税 and two-thirds for 都市計画税.
The 1/6 rule is doing a lot of work. For a typical home on a typical residential lot, this single reduction is why land tax ends up far lower than 1.4% of assessed value would suggest. It also means removing the house matters: because the discount applies to land used for housing, demolishing the building — say, ahead of a rebuild — can strip away the reduction and cause the land's tax bill to jump sharply, sometimes to several times its previous level, until a new home is completed.
The new-build reduction — and its expiry date
Separately from the land discount above, a newly built home also gets a temporary cut to the building's 固定資産税: the tax on the building itself is halved for the first three years after construction (extended to five years for a mansion or a home certified as long-life quality housing). This is a time-limited government incentive, not a permanent feature of the tax code. As of this writing it was extended again in the 令和8年度 (2026) tax reform and is currently set to run through 令和10年3月31日 (31 March 2028), with a further extension reportedly under discussion in policy circles. These renewal decisions tend to happen around April each fiscal year, so if the timing of a purchase matters to your calculations, confirm the currently applicable expiry date with your municipality or a recent 総務省 (Ministry of Internal Affairs and Communications) notice before relying on it.
The first-year proration custom
One quirk trips up a lot of first-time buyers: the tax is billed for the entire calendar year to whoever legally owns the property as of January 1. If you close mid-year, the seller is technically the one who owes the full year's tax — but long-standing market custom has the buyer reimburse the seller for the days from the closing date through December 31. This shows up on your closing statement as a 日割り (hiwari, daily proration) line item. It's worth flagging that this is a customary practice between buyer and seller, not a legal requirement or a separate tax — the municipality only ever bills the January 1 owner.
Where your exact numbers come from
Everything above explains the mechanics, but your actual bill depends entirely on your property's assessed value, your municipality's rates, and which reductions apply — figures that vary considerably by location. The document that tells you the real numbers is the 課税明細書 (kazei meisaisho, tax assessment notice), which arrives with your bill each year and itemizes the assessed value of your land and building separately, along with the reductions applied and the resulting tax due. As a general sense of scale, an owner-occupied home benefiting from the residential-land reduction often lands somewhere in the low-to-mid hundreds of thousands of yen per year combined for both taxes — but treat that only as a rough orientation, not a substitute for your own 課税明細書.
Because these annual taxes continue indefinitely, they belong in any real comparison between renting and owning — see how ongoing taxes factor into rent-vs-buy for that fuller picture. If you're still working through the purchase side of the math, the cost calculator can help you estimate the one-time side, and the FAQ covers other common questions that come up during the buying process.
This article is informational only and is not tax advice. Rates, reductions, and their expiry dates are set nationally and locally and change periodically, often each April — always confirm current figures with your municipality, a licensed tax professional, or 総務省 before making a decision.
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