Depreciation of Japanese Buildings

By MISAWA Masaki, Certified Tax Accountant (Zeirishi, Reg. No. 157367) — formerly of Japan’s tax authorities · Published July 11, 2026 · Reviewed July 17, 2026

Depreciation is one of the deductible expenses in computing Japanese real estate income, and it is also one of the areas where mistakes are most common. There are three points to keep in mind.

Land cannot be depreciated

First, land cannot be depreciated. The purchase price therefore needs to be allocated between land and building on a reasonable basis — for example, by working back from the consumption tax amount stated in the sale contract, or by apportioning in proportion to the fixed asset tax assessed values.

Useful lives, including second-hand buildings

Second, the useful life. For a new building, the statutory useful life depends on the structure: for residential use, 22 years for a wooden building and 47 years for reinforced concrete (RC). For a building acquired second-hand, an estimated life or the simplified method may be used instead. Under the simplified method, the life of a building that has passed part of its statutory life is “(statutory life − years elapsed) + years elapsed × 20%”, and the life of one that has passed its entire statutory life is “statutory life × 20%” (fractions of a year are dropped; the minimum is 2 years).

Third, if the building itself is separated from building fixtures and equipment, shorter useful lives can be applied to some components.

Comparing a new and second-hand building

The table below compares annual depreciation for a new and a second-hand wooden building (assumptions: residential wooden building; building portion acquired for ¥100,000,000; straight-line method; the simplified method is used for the second-hand building).

For the same acquisition cost, the 10-year-old building has a useful life of 14 years, and its annual depreciation is therefore ¥2,600,000 larger than that of the new building.

Differences from other countries’ rules

Note that depreciation systems differ from country to country — starting with the useful lives themselves. In the United States, for example, a residential rental building is depreciated over 27.5 years, whereas in Japan a wooden residential building has a statutory life of 22 years — and, for a second-hand building, a still shorter life under the simplified method above. Preparing a Japanese return with the instincts formed by your home-country filings can easily lead to errors.

Keep the acquisition documents

Finally, if the documentation supporting the land–building allocation or the age of a second-hand building is inadequate, the point may be challenged in a tax examination (see the separate article on tax examinations). Keep the documents from the time of acquisition — the sale contract, and a certificate of registered matters showing the construction date.