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Today's story will be a bit more difficult. That is, what happens to your mortgage deduction if you get transferred overseas? This is because many of our foreign clients ask us, “What will happen to my mortgage deduction if I am transferred overseas?

Because many of our foreign clients ask us, “What will happen to my mortgage deduction if I am posted overseas?

How can I get the mortgage deduction even if I am posted abroad? How can I avoid losing money?

This is because we receive many inquiries such as “What will happen to my mortgage deduction if I am transferred abroad?

This is a very in-depth topic, so we will be sharing the information in a series of articles.

If you still have a mortgage on your house and you receive a letter of appointment from your company to work overseas, you may be wondering what to do about the mortgage deduction.

What will happen to the mortgage deduction if I cannot continue to live in my house because of the overseas assignment/return to Japan?

In conclusion,

If the entire family moves to the overseas posting:

Mortgage deduction is not available.

If a family member continues to live in the home after moving to a single location:

The deduction may or may not be taken depending on the date and time of acquisition of the house.

This is the case.

However, the above will be treated differently depending on the presence or absence of dependents and the date and time of acquisition of the residence.

Furthermore, even if the entire family moves to an overseas posting, when they return home and live in the house again, they may be able to take the deduction again if there is still time left on the mortgage deduction.

However, you will not be able to receive the deduction unless you have completed the proper procedures before moving abroad/returning to your home country.

This means that you may lose up to 400,000 yen per year due to missing deductions that you should have been entitled to.

4. If the deduction period remains, the mortgage deduction can be reapplied after returning to Japan.
Even if the mortgage deduction is no longer available due to an overseas assignment, when you return to your home country and are able to live in your home again, you may be able to take the mortgage deduction again if you still have time left on your mortgage deduction period.

However, the period of ineligibility will not be extended.

The deduction is only available for the remaining period.

The deduction starts at different times for “owner-occupied house left vacant” and “owner-occupied house rented,” so you need to pay attention to the remaining period.

4-1. If the owner-occupied house was vacant, the deduction is available from that year.
If the owner-occupied house has been vacant, the deduction is available from the year in which the owner-occupied house is reoccupied.

For example, suppose that in the third year after acquiring the house, the entire family returns overseas for a job transfer.

You were posted overseas for four years, and in the seventh year you returned home and reoccupied the owner-occupied house.

In this case, the deduction is not available from the third to the sixth year, but the deduction resumes and becomes available from the seventh to the tenth year.

You can start living back in your owner-occupied house between January 1 and December 31 of the seventh year.

4-2. If you have been renting out your house, you can take the deduction from the following year.
If you have been renting out your house, you can take the mortgage deduction from the year following the year you reoccupy the house.

As in the previous example, suppose that in the third year after acquiring the home, the entire family returns overseas for a job transfer.

You were posted overseas for four years and returned home in the seventh year and reoccupied the home you owned.

If the house had been vacant, the mortgage deduction would be available from the seventh year, but if the owner-occupied house was rented, the deduction would be available from the eighth year, the following year.

The change in the timing of the resumption of the deduction for one year changes the impact on the remaining period of the mortgage deduction, so it is important to keep this in mind when renting out the house.

4-3. Supplement: Re-occupation by a family member alone can restart the mortgage deduction.

The mortgage deduction can be reinstated even if the deductible person moves out on his/her own and only family members return home and start living in the owner-occupied house again.

However, the family alone can resume the mortgage deduction only if the family “acquired the home on or after April 1, 2016.

If you are considering returning to home ownership before your family due to your children's higher education or other reasons, you may want to consider the remaining period of the mortgage deduction.

5. Procedures for Reapplying the Mortgage Deduction after Returning to Japan
Even if there is a remaining period of the mortgage deduction after returning to your home country, you will not be able to reapply for the deduction if you did not take the necessary procedures before you left for overseas assignment.

The following procedures should be taken before going abroad.

Let's look at each of them in detail.

5-1. [Before leaving Japan] Submit documents to the tax office with jurisdiction over the location of your residence.
In order to reapply for the mortgage deduction when you return from an overseas assignment, you must first submit the necessary documents to the tax office with jurisdiction over the location of your residence before leaving Japan.

Documents to be submitted to the tax office prior to transfer

Notification of the fact that you will no longer reside in your residence due to an order of transfer, etc.

Unused portion of the “Certificate of Special Deduction for (Specified Extension, Renovation, etc.) Housing Loan for Year-end Adjustment and Application for Special Deduction for (Specified Extension, Renovation, etc.) Housing Loan for Salaried Workers”.

　*Only if the certificate has been issued by the director of the tax office.

The “Notification of Not Residing Due to Transfer Order, etc.” is a notification form indicating that the move out of the owner's residence is not for personal reasons, but due to unavoidable circumstances such as being ordered by the company to transfer to another location.

The “Certificate of Special Deduction for (Specified Extension, Renovation, etc.) Housing Loan for Year-end Adjustment and Application for Special Deduction for (Specified Extension, Renovation, etc.) Housing Loan for Salaried Employees” will be returned only if it has been issued by the tax office.

If not, you only need to submit the “Notification Form of Not Residing in the same residence due to an order of change of address, etc.”.

The “Notification of Ceasing to Reside in Japan Due to Transfer Order, etc.” can be prepared and submitted using e-Tax software provided by the tax office.

If you do not have e-Tax software, you can prepare the form on your computer and send it by mail or bring it to the tax office.

5-2.[After returning to Japan] Apply for the special credit for housing loans, etc. on the tax return for the year in which you reside again.
When you return to your home after an overseas assignment and wish to reapply for the housing loan deduction, you must file an application for the deduction on your tax return for the year in which you return to your home.

If you submit the following required documents with your tax return, you can reapply for the credit.

Documents to be submitted to the tax office with your tax return after transfer

（Statement of calculation of the amount of special credit for housing loans (specified expansion, alteration, etc.)

Certificate of the year-end balance of the loan for the home acquisition (if the loan is issued from two or more sources, all certificates)

The required documents and procedures are the same as those for the first acquisition of a house and for receiving the mortgage deduction.

Once you file a tax return once, you can use the year-end adjustment from the following year.

It is important to start with what you can do and be prepared in advance.

Japanese people have a mentality of “If you are prepared, you are safe! This is a phrase you will hear often in Japan.

Please remember this phrase as well!


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