Is Employment Income Calculated After Deducting Necessary Expenses?


Q: The amount of business income is calculated by subtracting necessary expenses from total earnings. When calculating employment income, are necessary expenses subtracted from total salaries and wages, as with business income? 

A: No, employment income is calculated by subtracting the deduction for employment income from the gross amount of salaries and wages. The deduction for employment income is determined based on a statutory formula, which varies depending on the gross amount of salaries and wages. Therefore, actual expenses incurred in connection with employment are not deductible from the gross amount of salaries and wages when calculating employment income, as a general rule.


 




You
You
My salary for the fiscal year was 5,500,000 yen. How should employment income be calculated?

Your employment income should be calculated by applying the following statutory formula:
Wa Accounting
Wa Accounting

・5,500,000÷4=1,375,000 

・1,375,000×3.2−440,000=3,960,000 

Your taxable employment income is 3,960,000 yen.
Wa Accounting
Wa Accounting

Total earnings(A)

Amount of employment income Total earnings(A) Amount of employment income
Up to 550,999 0 yen 1,628,000 to 1,799,999

A /4 = B

(round down fractions less than 1,000)

B × 2.4 + 1,000,000
551,000 to 1,618,999 A – 550,000 1,800,000 to 3,599,999 B × 2.8 – 80,000 
1,619,000 to 1,619,999 1,069,000 yen 3,600,000 to 6,599,999 B × 3.2 -440,000 
1,620,000 to 1,621,999 1,070,000 yen 6,600,000 to 8.499,999 A × 0.9 – 1,100,000
1,622,000 to 1,623,999 1,072,000 yen 8,500,000 or more A – 1,950,000
1,624,000 to 1,627,999 1,074,000 yen

Source:NTA website

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