Spousal Deduction (配偶者控除) — Save Up to ¥160 Million in Inheritance Tax

How the Spousal Deduction Works

Under Article 19-2 of the Inheritance Tax Act, the surviving spouse can inherit the greater of the following two amounts completely tax-free:

Whichever amount is larger becomes the tax-free threshold. For estates under ¥320 million with children, the ¥160 million cap is typically the binding limit. For very large estates, the statutory share (50%) may exceed ¥160 million, providing even greater relief.

Eligibility Requirements

To claim the spousal deduction, the following conditions must be met:

• The surviving spouse must be legally married to the decedent at the time of death. There is no minimum marriage duration requirement.
• The marriage must be registered under Japanese family law (戸籍) or recognized under applicable foreign law.
• Common-law partners, domestic partners, and de facto relationships do not qualify.
• The inheritance tax return must be filed within the 10-month deadline, and the deduction must be explicitly claimed on the return.
• The division of the estate (遺産分割) must be finalized. If the division is still pending, the deduction can be applied retroactively once finalized (within 3 years plus a 2-month grace period).

Practical Examples

Example 1: Estate of ¥200 Million

A husband passes away, leaving a ¥200 million estate to his wife and two children. The wife's statutory share is 50%, or ¥100 million. Since ¥160 million is greater than ¥100 million, the wife can inherit up to ¥160 million tax-free. If the wife inherits exactly ¥100 million (her statutory share), her inheritance tax is zero.

Example 2: Estate of ¥500 Million

With a ¥500 million estate, the spouse's statutory share is ¥250 million (50%). Since ¥250 million exceeds the ¥160 million fixed amount, the spouse can inherit up to ¥250 million completely tax-free. This is where the statutory share option becomes more advantageous.

Important Considerations for Foreign Residents

Foreign nationals married to Japanese citizens are fully eligible for the spousal deduction, provided the marriage is legally registered. Key points to consider:

• Marriages performed overseas are generally recognized in Japan for tax purposes, but you may need to provide translated and notarized documents.
• Same-sex marriages recognized abroad are currently not recognized under Japanese law for inheritance tax purposes.
• If both spouses are foreign nationals, the deduction still applies as long as the estate is subject to Japanese inheritance tax.

Beware of the "Second Inheritance" Problem

While maximizing the spousal deduction reduces tax on the first inheritance, it concentrates assets in the surviving spouse's hands. When that spouse eventually passes away (the "second inheritance" or 二次相続), the children inherit without any spousal deduction, potentially resulting in a higher combined tax burden. A balanced approach that considers both inheritances is essential for proper estate planning.

How to Claim the Deduction

1. Complete the estate division agreement (遺産分割協議書) specifying what the surviving spouse will inherit.
2. File the inheritance tax return (相続税申告書) at the decedent's local tax office within 10 months.
3. Attach the required documents: family register (戸籍謄本), estate division agreement, and property valuations.
4. Explicitly claim the spousal deduction on Schedule 5 of the tax return.

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