Furusato Nozei Special Deduction Capped at JPY 1.93 Million From 2027 DonationsFurusato nozei: a cap on the tax savings for very rich people

Under the FY2026 (Reiwa 8) tax reform (Act Partially Amending the Local Tax Act, promulgated March 31, 2026 (Reiwa 8)), a fixed cap (JPY 1.93 million in total, equivalent to salary income of JPY 100 million) was placed on the special deduction from individual resident tax for furusato nozei (hometown tax donations, ふるさと納税). It applies to donations made in 2027 (Reiwa 9) (resident tax for FY2028 (Reiwa 10)). For local governments, a criterion that at least 60% of donations must be usable will be phased in.

Key points

• The special deduction limit is the lower of 20% of the income-based resident tax and a fixed amount (prefectural tax JPY 772,000 and municipal tax JPY 1,158,000, JPY 1.93 million in total). For residents of designated cities: JPY 386,000 and JPY 1,544,000
• There is no cap on the donation amount itself; even above the special deduction cap, the basic deduction (10% of donation − JPY 2,000) and the income tax deduction still apply
• Designation criteria for local governments now require a usable donation amount (donations − solicitation costs) of at least 60% and publication of its use. Designations from October 2026 require 52.5%, rising by 2.5 points each year
• After a designation is revoked, the period without designation becomes up to 3 years (2 years before), and violations subject to revocation are extended to within 4 years before the start of the designation period (1 year before)
• Donations received in FY2024 (Reiwa 6) totaled JPY 1,272.8 billion, of which JPY 165.6 billion (13%) was paid to portal site operators

What to do in practice

• High-income donors should recalculate whether donations from 2027 onward exceed the special deduction cap (JPY 1.93 million)
• Local governments and return-gift suppliers should review solicitation costs (such as portal site fees) and prepare to publish how donations are used