Property Depreciation in Japan: The 22-Year Wood Lever

What depreciation (genka shōkyaku) means in Japan

Genka shōkyaku (genka shōkyaku, depreciation) is the tax deduction that spreads an asset's value over time. Each year you subtract a fraction of the building's value from rental income, cutting the taxable base — with no actual cash outlay. It is the main tax lever of Japanese buy-to-let.

Two founding principles:

• only the building (tatemono, bâtiment) depreciates; the land (tochi, tochi) never does, as it does not lose value;
• the depreciation period follows a legal useful life (hōtei taiyō nensū, hōtei taiyō nensū) set by the tax authority according to the structural material.

Before calculating, you must split the purchase price into a land share and a building share — something we detail in our buying checklist.

Legal useful lives by construction type

The legal useful life hōtei taiyō nensū depends on the building's load-bearing structure. Reference lives for a dwelling:

Structure	Legal life (new)	Note
Wood mokuzō (mokuzō)	22 years	Shortest — strong tax lever
Light steel keiryō teppō (軽量鉄骨, ≤ 3 mm)	19 years	Thin-frame small houses
Light steel (3-4 mm)	27 years	Depends on steel thickness
Heavy steel jūryō teppō (重量鉄骨, > 4 mm)	34 years	Mid-size buildings
Reinforced concrete tekkin konkurīto (鉄筋コンクリート, RC/SRC)	47 years	Longest — slow depreciation

The shorter the life, the higher the annual depreciation and thus the larger the deduction. That is why investors often seek wooden houses: their 22-year life, further shortened on used stock, maximises the depreciation charge.

The straight-line method and the building share

For property held by an individual, depreciation follows the straight-line method (teigaku-hō, 定額法): a constant fraction each year. The basic formula is:

Annual depreciation = building value × (1 / depreciation period)

Two essential precautions:

• Isolate the building. On a property bought for ¥30,000,000 (≈ €200,000), if the land is worth ¥12M, only the building (¥18M) depreciates. The land/building split can come from the deed, the tax assessment, or a reasonable estimate.
• Land is excluded. No portion of the land is deductible — hence the appeal of a property with a large building share (recent house, RC) to maximise the depreciable base.

Depreciation adds to other deductible costs (property tax, management, works, loan interest where relevant) to cut taxable net rental income. See our piece on rental-income tax for non-residents.

Used property: the residual-life formula

Here lies the real lever. A used property does not depreciate over the new life, but over a shortened residual life, in two cases:

Case 1 — the property has exceeded its legal life

If the building's age is equal to or greater than the legal life (e.g. a 25-year wooden house, legal life 22), the depreciation period drops to:

legal life × 20% → for wood: 22 × 0.2 = 4.4 → 4 years (rounded down).

Case 2 — the property has not reached its legal life

If the building is younger than the legal life:

(legal life − age) + age × 20%. E.g. a 10-year wooden house: (22 − 10) + 10 × 0.2 = 12 + 2 = 14 years.

Striking result: a wooden house over 22 years old depreciates over just 4 years. On a building valued at ¥8M, that is ¥2M of depreciation a year — a massive deduction for four years. This is the mechanism at the heart of the "chūko mokuzō" (used wood) strategy and a strong argument for some wooden akiya.

Worked example and the effect on resale

Example: a 25-year-old wooden house

Price paid ¥15,000,000 (≈ €100,000), of which land ¥7M and building ¥8M. The building has exceeded its legal life (25 > 22) → period = 22 × 0.2 = 4 years.

• Annual depreciation = ¥8,000,000 × (1 / 4) = ¥2,000,000/yr (≈ €13,300) for 4 years;
• if net rent before depreciation is ¥1.2M/yr, depreciation creates a book loss in the early years: taxable rental income nil, even offsettable.

⚠ The recapture on resale

Beware the boomerang. Every yen depreciated lowers the book value of the property. Yet the taxable capital gain on resale is computed on this reduced base: the more you depreciated, the higher the taxable gain. Depreciation does not erase the tax, it defers it — and the long-term gains rate (often gentler) can work in your favour, so holding the property long enough pays off. Structure soundness matters too: check the 1981 seismic standard before buying an old wooden house.

In short: a powerful lever, to be handled with method

Property depreciation in Japan is the foremost tax lever of buy-to-let: you deduct part of the building each year (never the land) over a legal life (wood 22, RC 47), sharply shortened on used stock (down to 4 years for a wooden house over 22).

Three reflexes: 1) carefully isolate the building share in the price, the only depreciable base; 2) anticipate recapture on resale, as heavy depreciation inflates the taxable gain; 3) for a non-resident, have the setup validated by a Japanese accountant (zeirishi, zeirishi), as loss offset can be limited. Test the effect on your project in our yield simulator, and browse our wooden picks with strong depreciation potential. Unsure about the structure or the maths? Our buying support guides you.

Frequently asked questions

Over how many years is property depreciated in Japan?

The legal useful life depends on the structure: 22 years for wood, 19 to 34 for light or heavy steel, and 47 for reinforced concrete. These apply to new builds; a used property depreciates over a shortened residual life, which can fall to 4 years for a wooden house over 22 years old.

Can you depreciate land in Japan?

No. Only the building tatemono depreciates; land tochi does not lose value and is therefore never depreciable. You must split the price paid into a land share and a building share — only the latter forms the depreciation base.

How do you calculate depreciation on a used wooden property?

If the building has exceeded its legal life (wood: 22 years), the period becomes legal life × 20%, i.e. 22 × 0.2 = 4.4 rounded down to 4 years. If younger, the formula is (legal life − age) + age × 20%. A wooden house over 22 years old therefore depreciates in just 4 years.

Does depreciation increase the tax on resale?

Yes. Each amount depreciated reduces the book value of the property, which forms the base for the capital-gain calculation. The more you depreciated, the higher the taxable gain on resale. Depreciation defers the tax rather than erasing it, so holding the property long enough pays off.

Can a non-resident deduct depreciation in Japan?

Yes, depreciation also applies to non-residents on their Japan-source rental income. But offsetting a property loss and the filing rules are more restrictive: have the setup validated by a Japanese accountant zeirishi before buying.