Japan to extend tax exemption system for home renovations

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Informed sources said that the government and the ruling coalition are planning to extend the tax exemption system for people who renovate their homes.

The sources said that the tax exemption for home renovation will expire at the end of this year, but government officials and the ruling coalition are considering keeping it in effect until the end of 2023.

The decision to extend the program aims to boost sales of used homes amid a sharp rise in vacant homes across the country.

Under the tax credits, people who renovate to make their homes energy efficient, barrier-free, or earthquake-resistant are eligible for income tax credits.

A portion of loans taken to finance renovations are deducted from income tax, while for self-financed renovations, a portion of construction costs are deducted from taxes.

For renewals that meet certain requirements, 2% of outstanding loans at the end of the year, or up to 250,000 yen, can be deducted from income tax for five years. 1% discount for loans up to 10 million is available for other renewal work.

For self-financed renovations, 10 percent of construction costs can be deducted from income tax, or up to 500,000 for homes that meet all requirements ranging from earthquake resistance and energy efficiency to durability.

Government officials are also considering relaxing tax break requirements for insulation-related renovations that make homes more energy efficient.

The plan under consideration calls for people to only be required to replace some of their windows to improve insulation, rather than all windows as is currently required.

The move aims to enhance energy efficiency in homes that do not require heavy use of air conditioners.

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