Selling Property in Japan: Capital Gains Tax and the 5-Year Rule

Published October 26, 2026

Written by: Licensed real estate broker in Japan, 10 years at a listed real estate company, now a salaried landlord

Run your own numbers

Enter the price, rent, loan and your salary to see the monthly cash flow, the tax refund and a 35-year projection. Runs in your browser.

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Short answer

Gains on property are taxed at 39.63% if you have owned it for five years or less as of January 1 of the year you sell, and 20.315% after that.

Depreciation lowers your cost basis, so you can owe tax even when you sell for less than you paid.

How the gain is calculated

Sale price
¥19,800,000
− Cost basis
price − depreciation taken
− Selling costs
brokerage, stamp duty
= Taxable gain
¥3,720,199

Property gains are taxed separately from your salary at a flat rate. The cost basis (取得費) is what you paid for the land and building, minus the depreciation you have taken on the building.

The 5-year rule counts from January 1

5 years or less (short term)

39.63%

Over 5 years (long term)

20.315%

Short term: income tax 30% + reconstruction tax 0.63% + resident tax 9%. Long term: 15% + 0.315% + 5%.

The holding period is measured on January 1 of the year of sale, not on the sale date. A unit bought in August 2021 is short term if sold in 2026 and long term if sold in 2027. Waiting a few months can halve the tax.

Example: the ¥22 million condo after 10 years

The condo from our other articles (bought for ¥22,000,000, 14 years old at purchase) is sold after 10 years for 90% of the price.

Sale in year 10
Item	Amount
Sale price	¥19,800,000
Purchase price	¥22,000,000
Depreciation taken over 10 years	−¥6,639,599
Cost basis	¥15,360,401
Brokerage fee	−¥719,400
Taxable gain	¥3,720,199
Tax at 20.315% (long term)	¥755,758

The unit sold for ¥2.2 million less than it cost, yet there is a taxable gain of about ¥3.7 million. That gain is mostly the depreciation that lowered your income tax in earlier years, now taxed at a lower flat rate.

Selling too early hurts twice

Same unit, sold in year 5 vs. year 10

Year 5 (short term)

¥943,352

tax on a ¥2,380,399 gain

Year 10 (long term)

¥755,758

tax on a ¥3,720,199 gain

In year 5 the loan balance is still high, so the cash left after repaying the loan and the brokerage fee is only ¥296,978, less than the tax. You would pay about ¥646,000 out of pocket to sell.

Plan the exit

In the condo simulator, add an "Assumed sale (exit)" event on the 35-year tab to see the sale proceeds, the capital gains tax and the total return for any year.

Details: costs, records, and non-resident sellers

What counts as cost and selling expense

Cost basis: purchase price of land and building, plus brokerage fees and similar costs paid to buy, minus depreciation. Costs you already deducted as rental expenses cannot be counted again.
Selling expenses: brokerage fee on the sale, stamp duty on the sales contract, and costs to evict a tenant if needed.
The brokerage fee is capped at 3% of the price + ¥60,000, plus consumption tax, for properties over ¥4 million.

Keep the purchase contract

If you cannot prove the purchase price, the cost basis is deemed to be only 5% of the sale price, which can make the tax much larger.

No home-sale exemption for rentals

The ¥30 million special deduction applies to selling your own home, not to a property you rented out.

If you sell as a non-resident

When the seller is a non-resident, the buyer generally has to withhold 10.21% of the price and pay it to the tax office (with an exception for individuals buying a home for their own use for ¥100 million or less). You still file a return in Japan and settle the actual tax. A worked example is in selling Japanese property as a non-resident.

Frequently asked questions

Q. Is the gain added to my salary?

A. No. Property gains are taxed separately at the flat rates above, and a loss on a property sale generally cannot be offset against your salary.

Q. When do I pay?

A. In the final tax return for the year of sale, filed between February 16 and March 15 of the next year. Resident tax follows from June.

Q. Does depreciation really come back?

A. Yes. It lowers the cost basis. The benefit is that it was deducted at your salary tax rate and comes back at 20.315% if you sell long term.

Sources