Owning property in Japan comes with a set of recurring annual costs on top of any mortgage: fixed asset tax, city planning tax, and fire insurance, plus — for a condominium — a monthly management fee and a repair reserve contribution. This article lays out what each of these costs is, who owes it, how the amount is set, and which of them a landlord can deduct against rental income. It draws on official data from Japan’s Ministry of Land, Infrastructure, Transport and Tourism (MLIT), the Tokyo Metropolitan Taxation Bureau, the General Insurance Association of Japan, the Ministry of Finance, and the National Tax Agency.
**Example used throughout (for illustration only):** An overseas owner who bought a condominium in Tokyo’s 23 wards to rent out, with no mortgage. The sections below show how the rules apply to that situation.
What Fixed Costs Should You Budget for Every Year?
In simple terms, three costs can come up every year: fixed asset tax, city planning tax, and fire insurance. If the property is a condominium, add the management fee and the repair reserve contribution. This list follows MLIT’s published breakdown of housing costs, which lists mortgage payments, fixed asset tax, city planning tax, repair costs, and fire insurance, with condominiums carrying the additional management fee and repair reserve line.
| Item | Who It Applies To | How the Amount Is Set |
|---|---|---|
| Fixed asset tax (kotei shisanzei) | Owners of land, buildings, and depreciable assets as of January 1 each year; not charged below the exemption threshold | 1.4% in Tokyo’s 23 wards; set locally in other municipalities |
| City planning tax (toshi keikakuzei) | In principle, land and buildings within urbanization areas | 0.3% in Tokyo’s 23 wards; set locally in other municipalities |
| Management fee (kanrihi) | Condominiums | Set per property |
| Repair reserve (shūzen tsumitatekin) | Condominiums | Set by the long-term repair plan |
| Repair costs | When repair work actually takes place | Based on the actual work |
| Fire insurance (kasai hoken) | Owners who take out a policy | Set per policy |
| Earthquake insurance (jishin hoken) | Owners who add this coverage; must be attached to a fire policy | Varies by building structure and location |
| Mortgage | Owners with a loan | Set by the loan agreement |
A mortgage only counts as a holding cost if you actually have a loan — not every owner pays it. In the example above, the owner has no mortgage, so that line simply doesn’t apply.
How Much Are Fixed Asset Tax and City Planning Tax Each Year?
In Tokyo’s 23 wards, fixed asset tax is 1.4% and city planning tax is 0.3%. These two rates don’t carry over directly to other municipalities (Japan’s local governments).
First, the two taxes defined:
- Fixed asset tax: charged by the municipality where the property is located, on whoever owns the land, building, or depreciable asset as of January 1 each year. In Tokyo’s 23 wards, the Tokyo Metropolitan Government collects it directly.
- City planning tax: an earmarked tax, whose proceeds can only be spent on city planning projects or land readjustment projects.
In Tokyo’s 23 wards, the two taxes are billed together. Even so, when building an annual cost table it’s still best to list them as two separate lines. For the definitions of each tax and who owes it, see Zagdim’s companion article on annual property taxes and rental filing in Japan (linked in the “Localised” notes).
Residential Land Gets a Discounted Tax Base
The tax rate isn’t applied directly to the property’s price, but to a “tax base” — the figure the rate is actually multiplied against. According to Tokyo Metropolitan Government data, the tax base for residential land is discounted, but the land first has to qualify for residential-land treatment.
| Residential Land Portion | Fixed Asset Tax Base | City Planning Tax Base |
|---|---|---|
| Up to 200 sqm per household (small-scale residential land) | Price × 1/6 | Price × 1/3 |
| Portion over 200 sqm per household (general residential land) | Price × 1/3 | Price × 2/3 |
Not Every Owner Receives a Tax Bill
Amounts below a threshold simply aren’t taxed. In Tokyo’s 23 wards, the rule is:
- If one person’s land holdings within the same ward have a combined tax base under 300,000 yen, that land isn’t subject to fixed asset tax.
- If one person’s buildings within the same ward have a combined tax base under 200,000 yen, those buildings aren’t subject to fixed asset tax.
- The threshold is calculated separately by ward, by owner, and separately for land and for buildings.
- What matters is the tax base, not the market price or the sale price.
2026 Payments Are Due in Four Installments
For the 2026 tax year, Tokyo’s 23 wards collect both taxes in four installments:
- June 30, 2026
- September 30, 2026
- December 28, 2026
- March 1, 2027
These are only the 2026 deadlines — don’t assume they repeat identically every year. For how overseas owners receive the tax bill and arrange payment, see Zagdim’s companion article on tax bills and tax agents for overseas owners of Japanese property (linked in the “Localised” notes).
What’s the Difference Between the Management Fee and the Repair Reserve?
In one line: the management fee pays for day-to-day management now; the repair reserve sets money aside for repairs later.
- Management fee: covers managing the condominium’s shared areas.
- Repair reserve: sets aside money for future repairs to the shared areas; the amount is set by the long-term repair plan.
MLIT advises checking three things before buying a condominium: the monthly management fee, the repair reserve contribution, and the repair work plan. A low repair reserve at the time of purchase doesn’t mean the long-term burden will be lighter.
For how the management fee factors into cash flow, see Zagdim’s companion article on rental income, mortgage cash flow, vacancy, and management fees (linked in the “Localised” notes).
How Do Fire and Earthquake Insurance Work?
Earthquake insurance can’t be bought on its own — it has to be added onto a fire insurance policy. Fire insurance itself is one line on the standard housing-cost list. Earthquake coverage can also be added partway through, while the fire policy is still active.
How earthquake insurance coverage works:
- The building and the household contents (furniture, appliances, and other belongings inside the home) are insured separately.
- The coverage amount is 30% to 50% of the fire insurance coverage amount.
- Maximum coverage is 50 million yen for the building and 10 million yen for contents.
- The premium varies by building structure and location. Put the actual figure from your own policy into your annual cost table.
According to the Ministry of Finance, earthquake insurance only covers buildings used as a residence and the household contents inside them. Buildings used exclusively as factories or offices, where no one lives, aren’t covered. Whether rental housing or a combined shop-and-residence building can be insured, and at what premium, depends on the individual policy.
Which of These Costs Can You Deduct From Rental Income?
Yes, but only the portion that was spent to earn the rent and that can be separated from your own household living expenses. The portion used for your own residence can’t be deducted.
Two terms first:
- Real estate income (fudōsan shotoku): the income earned from renting out property, calculated as total revenue minus necessary expenses.
- Necessary expenses (hitsuyō keihi): costs directly required to earn that income.
| Item | Deductible? | Condition |
|---|---|---|
| Fixed asset tax | Yes | Only the portion used for the rental business |
| Casualty insurance premiums | Yes | Must relate to the rental property and be separable from personal use |
| Repair costs for ordinary maintenance | Yes | Based on what work was actually done, not what the work is called |
| Repairs that extend useful life or increase value | Not fully deductible in the year paid | Treated as capital expenditure, deducted over several years through depreciation |
| Depreciation (genka shōkyakuhi) | Yes | Must relate to the rental property |
| Management fee | Depends | Must relate to that year’s business or total revenue, with the liability fixed in that year; for mixed-use spending, only the portion clearly tied to the rental business is deductible |
| Repair reserve contributions | In principle, deductible in the year the repair work is completed | Deducted based on the amount actually used for that project; deductible in the year payment is due if four conditions are met |
| Interest on a loan taken to acquire land, etc., for the rental business | Yes | But if real estate income shows a loss, the portion of that loss caused by interest on the land-acquisition loan can’t be offset against other income |
| Mortgage principal | No | Must be calculated separately from interest |
| Income tax, resident tax | No | — |
A few terms in plain language:
- Capital expenditure: spending that makes the property better or more durable — effectively an investment in the property, so it can’t be deducted all at once.
- Depreciation: spreading that kind of large expense across several years, deducting a portion each year.
- Loss offsetting (son’eki tsūsan): using a loss from one type of income to offset a gain from another type of income.
When Can You Deduct the Repair Reserve?
Paying it doesn’t mean you can deduct it that same year. To deduct it in the year payment is due, all four conditions must be met:
- It’s paid under a proper management agreement, and the owner is obligated to pay it.
- The management association (the body formed by the condominium’s owners) isn’t required to refund the money.
- The money is used only for future repairs.
- The amount is reasonably calculated based on the long-term repair plan and each owner’s share.
If these conditions aren’t met, the deduction has to wait until the year the repair work is actually completed. For example, suppose an owner paid the repair reserve this year: if all four conditions are met, it’s deductible in the year payment is due; if any one condition isn’t met, the deduction waits until the year the work is finished.
For how to file, see Zagdim’s companion article on which taxes apply to renting out property in Japan, management fee deductions, and filing (linked in the “Localised” notes).
Frequently Asked Questions
Does every property owner in Japan receive a fixed asset tax bill? No. In Tokyo’s 23 wards, if one person’s land in the same ward has a combined tax base under 300,000 yen, or buildings under 200,000 yen, that category isn’t taxed.
Do you pay fixed asset tax and city planning tax separately? No. According to Tokyo Metropolitan Government data, the two taxes are billed together. But when building an annual cost table, it’s still best to list them as two separate lines.
Can the repair reserve be deducted as a necessary expense in the year it’s paid? In principle, no. The deduction generally waits until the year the repair work is actually completed, based on the amount used for that project. It can be deducted in the year payment is due only if all four conditions are met.
What’s the maximum earthquake insurance coverage? The coverage amount is 30% to 50% of the fire insurance coverage amount. The maximum is 50 million yen for the building and 10 million yen for contents.
Glossary
- Fixed asset tax (kotei shisanzei): A tax charged by the municipality where the property is located (the Tokyo Metropolitan Government, for the 23 wards) on whoever owns land, a building, or a depreciable asset as of January 1 each year, based on the asset’s assessed price.
- City planning tax (toshi keikakuzei): An earmarked tax whose proceeds fund city planning projects or land readjustment projects.
- Repair reserve (shūzen tsumitatekin): Money set aside for future repairs to a condominium’s shared areas, with the amount set by the long-term repair plan.
- Necessary expenses (hitsuyō keihi): In calculating real estate income, the costs deducted from total revenue that are directly required to earn that income.
About This Data
The facts in this article were checked as of October 21, 2026. Tokyo’s 23-ward tax rates, the special tax-base treatment for residential land, the exemption thresholds, and the payment deadlines were compiled from the Tokyo Metropolitan Taxation Bureau; other municipalities set their own rules by local announcement. The 2026 payment deadlines apply only to that tax year. How to take out earthquake insurance and its coverage amounts were compiled from the General Insurance Association of Japan, an industry body rather than a government agency. What earthquake insurance covers follows Ministry of Finance data. Whether rental-related costs can be deducted as necessary expenses is drawn from National Tax Agency public data; individual cases are governed by the rules in effect at the time of filing. The actual amounts for the management fee, repair reserve, fire insurance, and earthquake insurance depend on the individual property and policy; official data doesn’t give a universal figure, so this article does not quantify them. The example used throughout this article is illustrative only and doesn’t represent any real case.
Have a question about this guide? Leave a comment below, or ask Zagdim directly.
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Sources
- Tokyo Metropolitan Taxation Bureau — Fixed Asset Tax
- City Planning Tax (Land
- Buildings)
- MLIT — What Costs Are Involved in Housing?
- MLIT — Housing: Condominium Management
- General Insurance Association of Japan — Earthquake Insurance
- Ministry of Finance — Overview of the Earthquake Insurance System
- National Tax Agency — No.1370 Real Estate Income
- National Tax Agency — No.2210 Knowledge of Necessary Expenses
- National Tax Agency — No.1379 Determining What Does Not Count as Repair Costs
- National Tax Agency — Treatment of the Repair Reserve for a Rented Condominium
Important Notice
This article is a general information summary and does not constitute tax or legal advice for any individual case. Facts were checked as of October 21, 2026. Japanese rules may be updated; refer to the current published information from the relevant authority, and consult a qualified professional for individual cases.
