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commuting allowance is only half tax-free

Back in our fathers’ days (I say father because very few mothers worked back then), your father would look at his pay slip and find numerous “allowances” that reflected his job responsibilities, family structures, and family situations: executive allowance (役職手当) for employees with executives titles, child up-bringing allowance (養育手当) for employees with young children, alimony allowance (別居手当) for employees living separately with his spouse to carryout work away from home, vacant home allowance (留守宅手当) for employees who were sent abroad and left his home vacant, etc. Good for our fathers. But today, these allowances are becoming ancient as the concept of annual salary becomes wide spread. However, there is one allowance that we continue to, and will probably continue to see on our pay slips: commuting allowance (通勤手当).

The best thing about commuting allowance is that its tax free (非課税), well almost. I say almost because for one thing, there is a general limit (上限) of 100,000 yen per month. But not many people commute 4 hours a day one-way to work so we don’t need to worry about that. The second thing, and probably the more attention worthy, is that although commuting allowances are tax free, they are subject to social insurance and employment insurance premiums. Mentioned earlier in “figuring out your health insurance premium”, you’re health insurance premium is calculated based on standard remuneration (標準報酬月額) which is based on your monthly salary range. What commuting allowance often does is push your monthly compensation into a higher monthly salary range thereby increasing your monthly social insurance premium. Employment insurance premium is not calculated based standard remuneration and is straight forward: your total monthly salary multiplied by the premium rate. Commuting allowance increases your employment insurance premiums because it is included when computing the premium.

Question then is, should you take the commuting allowance for tax savings or should you not take it for social and employment insurance premium savings? I say take it because you get to take the train for free, if your destination is between your home station and work station. If your shortest train route doesn’t have stations that you normally go on weekends with friends and significant other, say, Aoyama for shopping or Shinjuku for language school, try choosing the next shortest route (but be prepared to justify your reason). In many cases, the benefit of that far outweighs expected social and employment insurance premium savings.


2007年01月08日 Taxes トラックバック:0 コメント:0