What is the relationship between the hometown tax system and annual income? We will also explain how to apply and how to apply!

Many people are considering using hometown tax as a means of saving tax and helping their household budget. However, there may be some people who do not understand the hometown tax system. Furusato Nozei is a system in which the total amount of donations to local governments minus the ¥2,000 co-payment is deducted from taxes. However, please note that there is a certain deduction limit depending on your annual income (income). Here, we will introduce the hometown tax system, the calculation method, and the upper limit of the percentage of annual income. Know how it works and use it wisely.

How does the hometown tax system work?

Although the hometown tax donation is called "tax payment", it is actually a donation to the local government. If you choose your favorite municipality and make a donation, in principle, the total amount of the donation minus the copayment of 2000 yen will be deducted from the income tax of the year of donation and from the inhabitant tax to be paid the following year. In addition, it is common to receive gifts such as specialty products from local governments that have made hometown tax donations. ■ How to apply The method of applying for hometown tax payment and paying donations differs depending on the municipality, so be sure to check the homepage of the municipality. There is also a method of using the services of a private hometown tax donation site that organizes hometown tax donations for various regions. ■Procedures for Receiving Deductions In order to receive income deductions and tax credits through furusato nozei, you must file a final tax return by the due date for the next year's tax return (usually March 15th). When you file a tax return, the amount corresponding to the donation amount will be deducted from your income tax, and the rest will be deducted from your next year's inhabitant tax. In addition, salaried workers can receive deductions without filing a final tax return if they submit an application form for one-stop hometown tax payment for up to five local governments. However, in the one-stop special case, it is all deducted from the inhabitant tax, and there is no deduction from the income tax.

What is the relationship between hometown tax deductions and annual income?

In principle, the hometown tax deduction amount is the total donation minus 2,000 yen. The deduction amount is calculated in three parts: a. deduction from income tax, b. deduction from inhabitant tax (basic portion), and c. deduction from inhabitant tax (special portion). It is important to note that each of a to c has an upper limit on the hometown tax amount that is eligible for deduction. Since the upper limit is determined based on the total income amount and the amount of the resident tax income, the deduction amount will be less than the donation amount depending on the annual income and hometown tax amount. ■ Deduction calculation method a. Deduction from income tax Deduction from income tax = (hometown tax payment - 2000 yen) x "income tax rate including special income tax rate for reconstruction (income tax rate x 1.021)" Income tax rate is the amount of taxable income is determined as shown in Chart 1. [Chart 1]