Selling an Inherited Vacant House? Here’s What You Need to Know

When selling land or property at a profit, you are required to pay a capital gains tax, which includes income tax and local residential tax. Given the high value of real estate transactions, the resulting tax liability can be significant. To help alleviate this burden, a special tax exemption known as the “Vacant House Deduction” has been introduced.

What is the “30 Million Yen Special Deduction for Vacant House Sales”?

The “30 Million Yen Special Deduction for Vacant House Sales” is a tax incentive introduced to address Japan’s growing vacant house issue. Abandoned properties pose various risks, including structural collapse, fire hazards, criminal activity, and negative impacts on surrounding neighborhoods. To encourage the sale and proper management of inherited vacant houses, the government offers a deduction of up to 30 million yen from the taxable profit of the sale.

If certain conditions are met, such as when parents or other relatives lived alone before their passing and the heirs, such as their children, do not move into the vacant house afterward, a tax deduction of up to 30 million yen can be applied, offering a significant tax-saving benefit.

A “Verification Certificate” is Required to Apply for the Deduction

To claim the “30 Million Yen Special Deduction for Vacant House Sales”,  sellers must submit a verification certificate as part of their tax return. This document serves as proof that the inherited property meets the eligibility requirements for the deduction. The certificate must be obtained from the municipality where the property is located. The application process involves submitting various supporting documents, including proof that the deceased lived alone in the house before passing and that the inheritor has not resided in or intends to live in the property. Due to the complexity of the process and the extensive documentation required, many individuals find it challenging to navigate.

To assist with this process, our firm provides comprehensive support in obtaining the necessary “Verification Certificate for Inherited Residential Properties” to ensure clients can take full advantage of this tax-saving measure.