Is it true that "once your annual earnings exceed ¥10,000,000, more than half goes to taxes"?

“Once your annual earnings exceed ¥10,000,000, more than half goes to taxes. Progressive taxation means 55%, so it can’t be helped.” Have you heard this from a boss or on social media?

“55%” sounds high, but the top rate is actually even higher: 55.945%. That is because the top income tax rate of 45% is joined by the special income tax for reconstruction (fukkō tokubetsu shotokuzei), which is 2.1% of the income tax amount (45% × 1.021 = 45.945%), and by the standard rate of 10% for resident tax (income-based portion).

However, this 55.945% is not charged on all of your income. It applies only to “the part” of taxable income above ¥40,000,000. For a person whose only income is a salary with annual earnings of ¥10,000,000, income tax is about ¥1,090,000, and even with resident tax added, the burden is about 18.5% of annual earnings. “More than half is taken” is wrong.

We checked this rumor against the original text of the law and the official information published by the National Tax Agency (NTA).

Five tax terms to know first

Here are plain-language explanations of the terms used in this article.

• Progressive taxation (ruishin kazei) = A system in which the tax rate rises as income gets larger.
• Excess progressive taxation (chōka ruishin) = A calculation method that splits income into brackets and applies a rate to each bracket.
• Total taxable income (kazei sō shotoku kingaku) = The amount left after subtracting the basic deduction and other deductions from income; tax is calculated on this amount.
• Average tax rate = The overall burden rate, found by dividing the tax amount by the income subject to tax.
• Marginal tax rate = The rate charged on the next ¥1 when your income goes up by ¥1. This is explained later in Pitfall 2.

Conclusion

Our verdict: “False.” Below, we look at the evidence step by step.

Not 55% but 55.945%, yet it does not apply to all income

First, let us look at the income tax rate, which makes up 45% of the 55%. Article 89 of the Income Tax Act provides that the tax is calculated by “dividing [the income] into brackets, multiplying each amount by the rate, and adding up the results.”

居住者に対して課する所得税の額は、その年分の課税総所得金額又は課税退職所得金額をそれぞれ次の表の上欄に掲げる金額に区分してそれぞれの金額に同表の下欄に掲げる税率を乗じて計算した金額を合計した金額と、その年分の課税山林所得金額の五分の一に相当する金額を同表の上欄に掲げる金額に区分してそれぞれの金額に同表の下欄に掲げる税率を乗じて計算した金額を合計した金額に五を乗じて計算した金額との合計額とする［1］

Reference translation (unofficial): The amount of income tax imposed on a resident is the sum of: the amount obtained by dividing the total taxable income or the taxable retirement income for the year into the amounts listed in the upper column of the following table, multiplying each amount by the tax rate listed in the lower column of that table, and adding up the results; and the amount obtained by dividing an amount equal to one-fifth of the taxable timber income for the year into the amounts listed in the upper column of that table, multiplying each amount by the tax rate listed in the lower column of that table, adding up the results, and multiplying the total by five.

(Excerpt)

Because the wording is stiff, here is what it means. Income is split into brackets such as “¥1,950,000 or less” and “over ¥1,950,000 up to ¥3,300,000,” a rate is applied to each bracket, and the results are added together. This is how income tax is calculated. The top rate of 45% is used only for the last bracket in this table, “the amount exceeding ¥40,000,000.”

四千万円を超える金額　百分の四十五［1］

Reference translation (unofficial): The amount exceeding ¥40,000,000: 45 percent

(Excerpt)

The NTA gives the same explanation of the rates.

所得税の税率は、分離課税に対するものなどを除くと、5パーセントから45パーセントの7段階に区分されています［2］

Reference translation (unofficial): Excluding rates for separate taxation and the like, income tax rates are divided into 7 levels, from 5 percent to 45 percent.

(Excerpt)

The rest is resident tax and the special income tax for reconstruction. The income-based portion of resident tax (shotokuwari) has a standard rate of 10% regardless of the size of income (4% prefectural inhabitant tax + 6% municipal inhabitant tax; most municipalities use these rates)［8］［9］. In addition, income tax is joined by the special income tax for reconstruction, which is 2.1% of the income tax amount［2］. Adding resident tax of 10% to 45% × 1.021 = 45.945% gives a top rate of 55.945%. It is actually a little higher than the 55% in the rumor. Note that for income arising on or after January 1, 2027 (Reiwa 9), the rate of the special income tax for reconstruction will be lowered to 1.1%, and the special income tax for defense (1% of the amount of income tax to be withheld) will also be withheld at the same time［2］. The figures in this article are calculated for 2026 (Reiwa 8) income.

However, this 55.945% is “the rate charged on the part of taxable income above ¥40,000,000.” It is not a rate charged on your whole income. Missing this distinction is where the rumor goes wrong.

The top rate applies only to “the part above ¥40,000,000”

Arranged from the lowest income upward, the rate table in Article 89 of the Income Tax Act has the following 7 brackets［1］.

The “With resident tax added” column is a guide made by adding the standard resident tax rate of 10% to each income tax bracket. Resident tax uses a different basic deduction and other deductions from income tax, so the taxable income is slightly different. The special income tax for reconstruction is not included (with it, the bottom row becomes 55.945%).

This way of reading the table is “excess progressive taxation.” The top rate applies only to the bottom row of the table. A person with annual earnings of ¥10,000,000 is not charged 55%. Instead, starting from the lowest bracket, the amount in each bracket is multiplied by that bracket’s rate.

The NTA’s quick calculation table (No.2260) is a way to do this calculation with one multiplication and one subtraction. The NTA page gives an example for taxable income of ¥7,000,000.

7,000,000円×0.23 - 636,000円= 974,000円［2］

Reference translation (unofficial): ¥7,000,000 × 0.23 − ¥636,000 = ¥974,000

(Excerpt)

Taxable income of ¥7,000,000 falls in the 23% bracket. Multiplying the whole amount by 23% would also apply 23% to the lower brackets (5%, 10%, and 20%), so the quick calculation table takes back the excess with a deduction of ¥636,000. In other words, the rate in the quick calculation table is “the rate for the part that has reached that bracket,” and the whole ¥7,000,000 is not taxed at 23%.

Calculating it for annual earnings of ¥10,000,000

Now let us calculate using the rumor’s “annual earnings of ¥10,000,000.” This is a rough estimate for a person whose only income is a salary, with the basic deduction as the only income deduction (in practice, deductions such as the social insurance premium deduction also apply, so the tax would be even lower).

First, the employment income deduction (kyūyo shotoku kōjo) is subtracted from the salary revenue. For revenue over ¥8,500,000, the employment income deduction is the upper limit of ¥1,950,000.

8,500,001円以上　 1,950,000円（上限）［3］

Reference translation (unofficial): ¥8,500,001 or more: ¥1,950,000 (upper limit)

(Excerpt)

Next, the income tax basic deduction is subtracted. For 2026 and 2027 (Reiwa 8 and 9), the basic deduction is set in steps according to total income. For a person with total income over ¥6,550,000 up to ¥23,500,000, it is ¥620,000［4］. This new amount takes effect on December 1, 2026 (Reiwa 8), so it is reflected from the year-end adjustment and final tax return for 2026 (Reiwa 8)［4］.

The calculation goes like this.

1. Total taxable income = ¥10,000,000 − ¥1,950,000 − ¥620,000 = ¥7,430,000
2. Income tax (quick calculation table) = ¥7,430,000 × 0.23 − ¥636,000 = ¥1,072,900
3. Special income tax for reconstruction = ¥1,072,900 × 2.1% = about ¥22,500
4. Resident tax (income-based portion) = (¥8,050,000 − ¥430,000) × 10% = ¥762,000. Subtracting the adjustment deduction of ¥2,500 gives ¥759,500

Income tax, the special income tax for reconstruction, and resident tax add up to about ¥1,855,000. The burden is 25.0% of the taxable income of ¥7,430,000, and about 18.5% of the salary revenue of ¥10,000,000.

Note that resident tax uses a different basic deduction amount from income tax (¥430,000; Local Tax Act, Article 314-2［6］). Resident tax is also charged on the previous year’s income, and the per-capita levy (kintōwari) is charged separately. Here we calculated a rough estimate using only the income-based portion. The adjustment deduction is based on Local Tax Act, Article 314-6［7］, among others.

The rate charged on the top part of this person’s income is 23% + 10% = 33%, not the 55% in the rumor. The overall burden is 18.5%, far from “more than half.”

Pitfall 1: Confusing “revenue” and “income”

The rumor reads as if “annual earnings of ¥10,000,000 = income of ¥10,000,000,” but these are different concepts. Income tax rates apply to income, not revenue. The amount of employment income is calculated by subtracting the employment income deduction from revenue.

給与所得の金額は、その年中の給与等の収入金額から給与所得控除額を控除した残額とする［5］

Reference translation (unofficial): The amount of employment income is the remainder after deducting the amount of the employment income deduction from the amount of revenue from salary, etc. during the year.

(Excerpt)

Let us compare with concrete examples.

Even for the same “¥10,000,000,” the amount taxed changes depending on whether it is revenue or income. B’s employment income deduction of ¥1,440,000 is calculated as revenue of ¥5,000,000 × 20% + ¥440,000［3］.

Pitfall 2: Confusing the “marginal tax rate” and the “average tax rate”

The other confusion is misreading the tax rate itself.

• Marginal tax rate = The rate charged on the next ¥1 when your income goes up by ¥1
• Average tax rate = The overall burden rate, found by dividing the total tax amount by income

For a person with taxable income of ¥7,430,000, the marginal tax rate is 33%: income tax of 23% plus resident tax of 10%. But the average tax rate for income tax alone is ¥1,072,900 ÷ ¥7,430,000 = 14.4%. Even with resident tax added, it is 25.0%. The “55%” in the rumor is also a marginal tax rate. It applies only to the part of taxable income above ¥40,000,000.

Then from what level of income does the combined burden of income tax and resident tax exceed half? It is as follows. The rows for ¥40,000,000 and ¥100,000,000 are calculated at income levels where the basic deduction and the adjustment deduction are ¥0 (including the special income tax for reconstruction).

Even at ¥40,000,000, where 55.945% starts to apply, the overall burden is 43.7%. The overall burden exceeds half only from around ¥82,000,000 of taxable income. Note that income tax alone never reaches half, no matter how much income grows (the top rate is 45.945% including the special income tax for reconstruction).

What to do

• When you hear “55% is taken,” check from which part of income upward that rate applies. The top rate (55.945%) applies only to the part of taxable income above ¥40,000,000.
• When you look at a tax rate, check whether it is “the marginal tax rate charged on that part” or “the overall burden rate (average tax rate).”
• For rumors told in terms of “annual earnings,” convert the figure into “taxable income” by subtracting the employment income deduction and the basic deduction.
• You can find which bracket your taxable income falls in with one calculation using the NTA’s quick calculation table (No.2260)［2］.
• For the exact tax amount, look at “the amount after the employment income deduction” and “the amount after income deductions” on your withholding slip (gensen chōshūhyō), or calculate it with the NTA’s Tax Return Preparation Corner (kakutei shinkokusho tō sakusei kōnā).

Summary

“Once your annual earnings exceed ¥10,000,000, more than half of your income is taken in taxes” is false. The “55%” in the rumor is actually an even higher figure, 55.945%, once the special income tax for reconstruction is included. But this rate applies only to the part of taxable income above ¥40,000,000. For a person whose only income is a salary with annual earnings of ¥10,000,000, the rate charged on the top part is 33%, and the overall burden is about 18.5% of annual earnings (a rough estimate with the basic deduction as the only income deduction). The burden on taxable income exceeds half only once taxable income goes above about ¥82,000,000.

Progressive taxation is a system that splits income into several brackets and applies higher rates to higher brackets. 55.945% is the rate charged only on the top bracket (the part of taxable income above ¥40,000,000). The parts below it are charged rates from 5% to 40%, bracket by bracket. That is why, even though the top rate is 55.945%, the burden on income as a whole is much lower. When you hear “a tax rate of ○%,” check from which part of income upward that rate applies.

Sources

• ［1］Income Tax Act, Article 89 (e-Gov Law Search, Japanese)　Checked: 2026-10-08
• ［2］NTA Tax Answer No.2260 “Income tax rates” (Japanese)　Checked: 2026-10-08
• ［3］NTA Tax Answer No.1410 “Employment income deduction” (Japanese)　Checked: 2026-10-08
• ［4］NTA Tax Answer No.1199 “Basic deduction” (Japanese)　Checked: 2026-10-08
• ［5］Income Tax Act, Article 28 (e-Gov Law Search, Japanese)　Checked: 2026-10-08
• ［6］Local Tax Act, Article 314-2 (e-Gov Law Search, Japanese)　Checked: 2026-10-08
• ［7］Local Tax Act, Article 314-6 (e-Gov Law Search, Japanese)　Checked: 2026-10-08
• ［8］Local Tax Act, Article 35 (e-Gov Law Search, Japanese)　Checked: 2026-10-08 (standard rate of the income-based portion of prefectural inhabitant tax)
• ［9］Local Tax Act, Article 314-3 (e-Gov Law Search, Japanese)　Checked: 2026-10-08 (standard rate of the income-based portion of municipal inhabitant tax)

Note: This article is based on laws and official information as of October 8, 2026. It is a translation of the Japanese original; if the two differ, the Japanese version prevails. Quotations from laws and official sources are given in the original Japanese, followed by unofficial reference translations. Sources are limited to laws (e-Gov) and official pages of the NTA and local governments, all in Japanese. If a correction is needed after publication, a correction record will be added at the end of this article (Correction policy).