Severance Pay Take-Home Calculator (Retirement Income Deduction & Separate Taxation)

Enter your lump-sum severance amount, years of service, and whether you are an officer/director to automatically calculate the retirement income deduction, income tax (with reconstruction surtax), and resident tax, and see your actual take-home severance pay.

Last updated: 2026-09-06

Retirement income deduction by years of service

The retirement income deduction increases in stages with years of service. Below are reference amounts for representative years of service.

Years of service	Retirement income deduction
5 years	2,000,000 yen
10 years	4,000,000 yen
15 years	6,000,000 yen
20 years	8,000,000 yen
25 years	11,500,000 yen
30 years	15,000,000 yen
35 years	18,500,000 yen
40 years	22,000,000 yen

What the tax on retirement pay comes to

Retirement pay in Japan carries a large tax-free allowance called the retirement income deduction, and of whatever remains after it, as a rule only half is treated as taxable — the so-called half taxation. This calculator takes the gross retirement payment, the years of service and whether you are leaving as a director or officer, and works through the deduction, the taxable retirement income, income tax (with the special reconstruction income tax) and residents’ tax in order, to estimate what you finally take home.

There is an exception to the half taxation where service is five years or less. Someone leaving as a director or officer gets no half taxation at all, and for an ordinary employee the portion above 3 million yen after the deduction falls outside it as well — a change effective from the 2022 tax year. The tool decides which rule applies from the years of service and whether the officer box is ticked, and calculates accordingly.

Sources used in this calculation

Statutory figures such as tax and insurance rates come from the public bodies listed below. They change when the law is revised, so please also check the primary source before relying on the result for an important decision.

Employees' pension insurance rate — Japan Pension Service (日本年金機構) Effective from 2017-09 ／ Last checked 2026-09-03
Income tax rates — National Tax Agency (国税庁) Effective from 2015-01 ／ Last checked 2026-09-03

How we source and maintain these figures

How to estimate your net retirement pay

Enter the gross retirement payment Enter the amount your employer has quoted, or the amount you expect, in units of ten thousand yen. Give the figure before withholding.
Enter the years of service Enter the years from joining to leaving. Any part-year is rounded up in the calculation, so there is no need to enter months.
Say whether you leave as a director or officer Tick the box if you are leaving as a director, executive officer or the like. With five years’ service or less, the half taxation is treated differently.
Read the result The deduction, the taxable amount, income tax, residents’ tax and the net figure appear automatically, and are recalculated each time you change an entry.

Tips for getting more out of it

Years of service are rounded up to the next whole year. If you worked 20 years and 1 month, calculate the deduction using 21 years.
If you retire as an officer/director (役員等) with 5 years of service or less, the 1/2 taxation reduction does not apply at all, resulting in a heavier tax burden than for regular employees.
Even regular employees with 5 years of service or less lost the 1/2 taxation reduction on the portion of the amount after deduction exceeding 3,000,000 yen, starting from the 2022 tax reform.
If you did not submit the "Report on Receiving Retirement Income" (退職所得の受給に関する申告書) to your employer, a flat 20.42% is withheld from your severance pay, and you will need to file a final tax return to get a refund.
Resident tax on severance pay is withheld all at once when the payment is made, unlike ordinary resident tax which is deducted from salary over the following year.

When this calculation helps

Knowing the net figure before the formal notice

Before your employer sends the formal notice of retirement pay, you can gauge roughly what you will receive from the gross figure and years of service alone — useful for planning living costs after a move or after retirement.

Comparing early retirement with retiring at the usual age

Enter the payment and years of service assumed under an early retirement scheme, then compare how the tax burden and the net figure differ from staying to the usual retirement age.

Checking the burden when an officer steps down

Where a director or officer steps down after a short spell, no half taxation applies and the burden is heavier. Use it as a guide when weighing the timing of departure.

Estimating before filing the retirement income declaration

Seeing beforehand what you would receive if you file the declaration puts a concrete figure on why filing it matters.

Terms about retirement pay

Retirement income deduction: The tax-free allowance within retirement pay. For twenty years’ service or less it is 400,000 yen per year (at least 800,000 yen); beyond twenty years, 700,000 yen per additional year is added to 8 million yen. The longer the service, the larger the allowance.
Retirement income: The gross payment less the deduction, multiplied as a rule by one half: the amount actually subject to income tax and residents’ tax. Being taxed separately, it is not added to your other income.
Half taxation: The arrangement whereby, as a rule, only half of the amount left after the deduction is taxable. It does not apply to a director or officer with five years’ service or less, and for an ordinary employee with five years or less it does not apply to the portion above 3 million yen.
Specified officer retirement allowance: The category applied to retirement pay received by a director or officer with five years’ service or less. No half taxation applies at all: the whole amount after the deduction is taxable as it stands.
Short-service retirement allowance: The category applied to retirement pay received by an ordinary employee with five years’ service or less. From the 2022 tax year, the first 3 million yen after the deduction still enjoys half taxation, but everything above it is taxable in full.
Declaration concerning receipt of retirement income: The document you submit to your employer before receiving retirement pay. File it and the correct tax reflecting the deduction and half taxation is withheld; fail to file it and a flat 20.42 percent is withheld from the gross amount.
Special collection: The arrangement whereby the employer collects the residents’ tax on retirement pay in a single sum at the time of payment. The per-capita levy that applies to ordinary salary is not added: the calculation is simply 10 percent of the taxable retirement income.

Frequently Asked Questions

If years of service are 20 or fewer, the deduction is "400,000 yen × years of service" (minimum 800,000 yen). If more than 20 years, it is "8,000,000 yen + 700,000 yen × (years of service − 20)". The longer you worked, the larger the deduction, which reduces the tax burden on your severance pay.

The partial year is rounded up to a full year. For example, 20 years and 1 month of service is treated as 21 years when calculating the retirement income deduction, so the exact number of extra months does not change the deduction amount.

Officers/directors with more than 5 years of service get the same 1/2 taxation reduction as regular employees. However, those with 5 years of service or less fall under the "specified officer severance pay" rule, which removes the 1/2 reduction entirely — the full amount after deduction becomes taxable, resulting in a heavier tax burden.

No. Resident tax on retirement income is collected via special withholding at the time of payment, and unlike the resident tax on regular salary, no fixed per-capita levy (roughly 5,000 yen) is added — it is calculated as a flat 10% of taxable retirement income only.

Without submitting the report, a flat 20.42% income tax and reconstruction surtax is withheld from the full severance amount. This is often more than the actual amount owed, so you may be able to claim a refund by filing a final tax return.

Side Note — Why severance pay gets preferential tax treatment

Severance pay is designed to carry a much lighter tax burden than ordinary salary income, reflecting its role as a reward for long years of service and a financial cushion for life after leaving a job. After a portion is made tax-free through the retirement income deduction, only half of the remainder is generally subject to tax — this "1/2 taxation" rule is why retirement income is taxed far more gently than salary under Japan's progressive tax brackets.

However, this 1/2 taxation rule was significantly revised starting in the 2022 tax year. Previously, as long as the deduction requirement was met, the full benefit of 1/2 taxation applied regardless of how short the years of service were — leading to criticism that some executives were repeatedly receiving severance pay after short tenures purely for tax-saving purposes. In response, regular employees with 5 years of service or less now lose the 1/2 taxation benefit on any portion of the amount after deduction exceeding 3,000,000 yen.

Officers and directors (yakuin-tou, 役員等 — those in positions close to management) have actually been subject to an even stricter rule since 2013, well before the 2022 reform: the "specified officer severance pay" (特定役員退職手当等) rule, under which the 1/2 taxation reduction does not apply at all if years of service are 5 or less. Because officers have more control over the timing of their own retirement than regular employees, they face a tougher standard.

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